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Computation of NPV of project

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Party Place is considering a new investment whose data are shown below. The equipment that would be used would be depreciated on a straight-line basis over the project's 3-year life, would have 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 3-year life. What is the project's NPV? (Hint: Cash flows are constant in Years 1 to 3.)

WACC 10.0%
Net investment in fixed assets (basis) $65,000
Required new working capital $10,000
Straight line depr'n rate 33.333%
Sales revenues, each year $70,000
Operating costs excl. depr'n, each year $25,000
Tax rate 35.0%

a. $24,112
b. $25,318
c. $26,584
d. $27,913
e. $29,309

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Solution Summary

The answer contains the computation of Net Present Value of Project when sales revenues and operating costs are given

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21664.5
cash outflow
cash inlows cost 65000
sales 70000 working ...

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