Question
Lakeside Winery is considering expanding its winemaking operations. The expansion will require new equipment costing $689,000 that would be depreciated on a straight-line basis to
Lakeside Winery is considering expanding its winemaking operations. The expansion will require new equipment costing $689,000 that would be depreciated on a straight-line basis to zero over the 6-year life of the project. The equipment will have a market value of $188,000 at the end of the project. The project requires $58,000 initially for net working capital, which will be recovered at the end of the project. The operating cash flow will be $154,200 a year. What is the net present value of this project if the relevant discount rate is 12 percent and the tax rate is 40 percent?
$23,840
$28,254
$26,488
$31,394
$33,809
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