DeVault Services recently hired you as a consultant to help with its capital budgeting process. The company is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight-line method over its 3-year life, and would have a zero salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV?

Risk-adjusted WACC	10.0%
Net investment cost (depreciable basis)	$65,000
Straight-line deprec. rate	33.3333%
Sales revenues, each year	$65,500
Operating costs (excl. deprec.), each year	$25,000
Tax rate	35.0%

a. $16,569

b. $17,441

c. $18,359

d. $19,325

e. $15,740

2.

Kasper Film Co. is selling off some old equipment it no longer needs because its associated project has come to an end. The equipment originally cost $22,500, of which 75% has been depreciated. The firm can sell the used equipment today for $6,000, and its tax rate is 40%. What is the equipment's after-tax salvage value for use in a capital budgeting analysis? Note that if the equipment's final market value is less than its book value, the firm will receive a tax credit as a result of the sale.

a. $5,850

b. $6,450

c. $6,772

d. $5,558

e. $6,143

3.

McPherson Company must purchase a new milling machine. The purchase price is $50,000, including installation. The machine has a tax life of 5 years, and it can be depreciated according to the following rates. The firm expects to operate the machine for 4 years and then to sell it for $12,500. If the marginal tax rate is 40%, what will the after-tax salvage value be when the machine is sold at the end of Year 4?

Year	Depreciation Rate
1	0.20
2	0.32
3	0.19
4	0.12
5	0.11
6	0.06

a. $10,355

b. $8,878

c. $9,345

d. $10,900

e. $9,837