Question
Lourdes Adventure Products is considering a project which will require the purchase of $1.4 million in new equipment. The equipment belongs in a 20% CCA
Lourdes Adventure Products is considering a project which will require the purchase of $1.4 million in new equipment. The equipment belongs in a 20% CCA class. Lourdes expects to sell the equipment at the end of the project for 20% of its original cost. Annual sales from this project are estimated at $1.2 million. Net working capital equal to 20% of sales will be required to support the project. All of the net working capital will be recouped at the end of the project. The firm desires a minimal 14% rate of return on this project. The tax rate is 34%. The project is expected to last 7 years.
What is the present value of the net working capital changes associated with the project?
Lourdes Adventure Products is considering a project which will require the purchase of $1 .4 million in new equipment. The equipment belongs in a 20% CCA class. Lourdes expects to sell the equipment at the end of the project for 20% of its original cost, Annual sales from this project are estimated at $1.2 million. Net working capital equal to 20% of sales will be required to support the project. All ofthe net working capital will be recouped at the end of the project. The firm desires a minimal 14% rate of return on this project. The tax rate is 34%. The project is expected to last 7 years. What is the present value of the net working capital changes associated with the project? (.9 $262,807 0 $240,427Step 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