Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, some new working capital would be required, but it 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 3-year life. What is the project's NPV? WACC Net investment in fixed assets (depreciable basis) Required new working capital Straight-line deprec. rate Sales revenues, each year Operating costs (excl. deprec.), each year Expected pretax salvage value Tax rate 10.0% $70,000 $10,000 33.333% $75,000 $30,000 $5,000 35.0%
Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, some new working capital would be required, but it 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 3-year life. What is the project's NPV? WACC Net investment in fixed assets (depreciable basis) Required new working capital Straight-line deprec. rate Sales revenues, each year Operating costs (excl. deprec.), each year Expected pretax salvage value Tax rate 10.0% $70,000 $10,000 33.333% $75,000 $30,000 $5,000 35.0%
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
Problem 1PS
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Ef 336.
Transcribed Image Text:Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3-year tax life and would be
fully depreciated by the straight-line method over 3 years, but it would have a positive pre-tax salvage value at the end of Year 3, when
the project would be closed down. Also, some new working capital would be required, but it 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 3-year life.
What is the project's NPV?
WACC
Net investment in fixed assets (depreciable basis)
Required new working capital
Straight-line deprec. rate
Sales revenues, each year
Operating costs (excl. deprec.), each year
Expected pretax salvage value
Tax rate
10.0%
$70,000
$10,000
33.333%
$75,000
$30,000
$5,000
35.0%
Please solve using Excel and please show the formulas in excel. Thank you.
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