Alberta Pasta is considering producing a new type of pasta. The required equipment has a constant capital cost allowance over its 3-year life with a zero salvage value. No new working capital would be required. Revenues and cash operating costs are expected to be constant over the projects 3-year life. However, this project would compete with other Alberta Pasta products and would reduce the companys pre-tax annual cash flows. What is the projects NPV?

WACC	10.0%
Pre-tax cash flow reduction in other products (cannibalization)	$15,000
Investment cost	$65,000
Annual capital cost of allowance (assume constant capital cost allowance for ease of computation)	$31,000
Annual sales revenues	$80,000
Annual cash operating costs	$25,000
Tax rate	25.0%

	a	$37,750
	b	$29,325
	c	$93,879
	d	$28,879