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problem: Swannee Resorts is bearing in mind a new project whose data are shown below. The equipment that would be used has a three year tax life, would be depreciated by the straight line method over the project's three year life, & would have zero salvage value. No new working capital would be required. Revenues & other operating costs are expected to be constant over the project's three year life. find out the project's Net Present Value? Ignore small rounding differences between your answer & the choices given. [Hint: Cash flows are constant in Years 1-3.]

WACC = 10 percent

Net investment cost (depreciable basis) = $65,000

Straight line depreciation rate = 33.33 percent

Sales revenues = $70,000

Operating costs excl. depreciation = $25,000

Tax rate = 35 percent

[A] $24,354.87$25,189.71

[B] $26,599.05

[C] $22,156.24

[D] $23,791.14

Basic Finance, Finance

  • Category:- Basic Finance
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