10.

Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project:

Cost of equipment needed				$	250,000
Working capital needed				$	60,000
Overhaul of the equipment in two years				$	18,000
Annual revenues and costs:
Sales revenues				$	350,000
Variable expenses				$	180,000
Fixed out-of-pocket operating costs				$	80,000

The piece of equipment mentioned above has a useful life of five years and zero salvage value. Lander uses straight-line depreciation for financial reporting and tax purposes. The companys tax rate is 30% and its after-tax cost of capital is 12%. When the project concludes in five years the working capital will be released for investment elsewhere within the company.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

Calculate the net present value of this investment opportunity. (Negative amounts should be indicated by a minus sign. Round discount factor(s) to 3 decimal places.)

Exhibit 1:

Exhibit 2:

Net present value