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% |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started