Sam Corp. is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require some additional working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV? WAAC = 1196, tax rate = 35% (Hint: Cash flows are constant in Years 1 to 3.) Show all work: Net investment in fixed assets (basis) Required new working capital $75,000 $15,000 Sales revenues, each year $75,000 Operating costs (excl. deprec.), each year $25,000

Sam Corp. is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require some additional working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's life. What is the project's NPV? WAAC = 1196, tax rate = 35% (Hint: Cash flows are constant in Years 1 to 3.) Show all work: Net investment in fixed assets (basis) Required new working capital $75,000 $15,000 Sales revenues, each year $75,000 Operating costs (excl. deprec.), each year $25,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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