Question
A project will produce revenues of $7,300 a year for three years (at t=1, 2, and 3). The equipment needed for this project will cost
A project will produce revenues of $7,300 a year for three years (at t=1, 2, and 3). The equipment needed for this project will cost $11,600 (at t = 0) and will be depreciated straight-line to zero over a 4-year life. There be an initial $500 invested in net working capital (NWC) at t=0. NWC will increase by $500 at both t = 1 and t =2, and then be reduced to $0 at t=3. At t = 3 and the equipment will be sold to a local fish wholesaler for $3,600. If the tax rate is 40 percent and the required rate of return is 12 percent -- what is the NPV of the project?
Answer: 3,791.90 Could you explain how to solve this problem?
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