Redmond Incorporated, with a tax rate of 26% and a weighted average cost of capital of 8.4%, is looking at a project that requires an outlay of $150,000 for equipment at t = 0, that is to be depreciated straight-line over a three-year period, and not expected to have salvage value after three years. It also requires an expenditure for $30,000 working capital which can be recovered in year three. There is an expectation that the project will bring in an additional $140,000 revenue with additional operating costs, not including depreciation) of $60,000 every year for the next three years. What is the net present value of this project to the nearest dollar?
Redmond Incorporated, with a tax rate of 26% and a weighted average cost of capital of 8.4%, is looking at a project that requires an outlay of $150,000 for equipment at t = 0, that is to be depreciated straight-line over a three-year period, and not expected to have salvage value after three years. It also requires an expenditure for $30,000 working capital which can be recovered in year three. There is an expectation that the project will bring in an additional $140,000 revenue with additional operating costs, not including depreciation) of $60,000 every year for the next three years. What is the net present value of this project to the nearest dollar?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Redmond Incorporated, with a tax rate of 26% and a weighted average cost of capital of 8.4%, is looking at a project that requires an outlay of $150,000 for equipment at t = 0, that is to be
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