The machinery required for a three year project costs $20,000, belongs in a 15% CCA class, and will require a net working capital investment of $5,000 up-front (net working capital is recovered at the end of the project). The project generates pre-tax sales less cash costs of $15,500 in each of years 1 to 3. The fixed assets will be sold for a salvage value of $2,000 at the end of the project. If the firm has a tax rate of 35% and a required return of 10%, what is the project NPV?
The machinery required for a three year project costs $20,000, belongs in a 15% CCA class, and will require a net working capital investment of $5,000 up-front (net working capital is recovered at the end of the project). The project generates pre-tax sales less cash costs of $15,500 in each of years 1 to 3. The fixed assets will be sold for a salvage value of $2,000 at the end of the project. If the firm has a tax rate of 35% and a required return of 10%, what is the project NPV?
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 2P
Related questions
Question
Give typing answer with explanation and conclusion
![The machinery required for a three year project costs $20,000, belongs
in a 15% CCA class, and will require a net working capital investment of
$5,000 up-front (net working capital is recovered at the end of the
project). The project generates pre-tax sales less cash costs of $15,500
in each of years 1 to 3. The fixed assets will be sold for a salvage value of
$2,000 at the end of the project. If the firm has a tax rate of 35% and a
required return of 10%, what is the project NPV?
Multiple Choice
O $12,021
$12,446
$10,432
to 200](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6caf6888-7510-4e57-98ad-4d3884a1ba86%2F874e69b2-579d-4e8e-bed9-fb90df388e83%2F9t8o8kl_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The machinery required for a three year project costs $20,000, belongs
in a 15% CCA class, and will require a net working capital investment of
$5,000 up-front (net working capital is recovered at the end of the
project). The project generates pre-tax sales less cash costs of $15,500
in each of years 1 to 3. The fixed assets will be sold for a salvage value of
$2,000 at the end of the project. If the firm has a tax rate of 35% and a
required return of 10%, what is the project NPV?
Multiple Choice
O $12,021
$12,446
$10,432
to 200
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