Question
MCentral Heating Co. is considering a project with the following financial characteristics: Fixed capital outlay is $1.5 billion Investment in net working capital is $0.4
MCentral Heating Co. is considering a project with the following financial characteristics:
Fixed capital outlay is $1.5 billion
Investment in net working capital is $0.4 billion.
Straight-line depreciation is over a six-year period with 0 salvage value.
Project life is 12 years.
Additional annual revenes are $0.1 billion.
Annual cash operating expenses are reduced by $0.25 billion.
The capital equipment is sold for $0.5 billion in 12 years.
Tax rate is 40%.
Required rate of return is 12%.
Will this project have a postive effect on Mcentral HeatingCos stock price?Whats your estimation of this project NPV?
A. | No. The NPV is $0.35 billion | |
B. | No. The NPV is $-0.01 billion | |
C. | Yes. The NPV is $0.35 billion | |
D. | Yes. The NPV is $-0.01 billion |
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