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 Other Op Costs (excluding depreciation) $25,000 Depreciation Rate 33.33% Tax Rate 35.00%.
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