Question
Foley Systems is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year
Foley Systems is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require no additional net operating working capital. Revenues and operating costs are expected to be constant over the project's life. The tax rate is 35%. What is the project's NPV, IRR, Discounted Payback and Profitability Index? (Hint: Cash flows from operations are constant in Years 1 to 3.)
Cost of Capital | 10.00% |
Net Investment | $75,000 |
Revenue | $75,000 |
Operating Costs (excluding depreciation) | $50,000 |
Depreciation Rate | 33.33% |
Tax Rate | 35.00% |
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