Temple Corp. is considering a new project whose data are sho
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Temple Corp. is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV?
Risk-adjusted WACC 10.0%
Net investment cost (depreciable basis) $65,000
Straight-line depr. rate 33.3333%
Sales revenues, each year $73,500
Operating costs (excl. depr.), each year $25,000
Tax rate 35.0%
a. $34,191
b. $27,417
c. $29,675
d. $32,256
e. $36,449
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Project NPV
t = 0 t = 1 t = 2 t = 3
Investment in fixed assets WACC = 10% -$65,000
Sales revenues $73,500 $73,500 $73,500
- ...
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