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?

Question

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

Anonymous · Answer

29675