Question
Majestic Theaters is considering investing in some new projection equipment whose data are shown below. The required equipment has a 7-year project life falling into
Majestic Theaters is considering investing in some new projection equipment whose data are shown below. The required equipment has a 7-year project life falling into a CCA class of 30%, but it would have a positive pre-tax salvage value at the end of Year 7. Also, some new working capital would be required, but it would be recovered at the end of the projects life. Revenues and cash operating costs are expected to be constant over the projects 7-year life. What is the projects NPV?
WACC | 12.0% |
Net capital investment in fixed assets | $950,000 |
Required new working capital | $30,000 |
Sales revenues, each year | $580,000 |
Cash operating costs, each year | $330,000 |
Expected pretax salvage value | $50,000 |
Tax rate | 35.0% |
$15,226 | ||
$17,882 | ||
$13,965 | ||
$16,910 |
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