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A project requires an initial investment in equipment of $90,000 and also requires an initial investment in net working capital of $10,000 (at t= 0),
A project requires an initial investment in equipment of $90,000 and also requires an initial investment in net working capital of $10,000 (at t= 0), net working capital is recovered at the end of the project. You expect the project to produce sales revenue of $120,000 per year for three years. You estimate manufacturing costs at 60% of revenues. (Assume all revenues and costs occur at year-end, i.e., t= 1,t=2, and t = 3.) The equipment depreciates using straight-line depreciation to zero over three years. At the end of the project, the firm can sell the equipment for $10,000. The corporate tax rate is 30% and the cost of capital is 16.5%. Calculate the NPV of the project
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