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Orange Valley Banking is considering a project that would last for 2 years and have a cost of capital of 17.1 percent. The relevant level
Orange Valley Banking is considering a project that would last for 2 years and have a cost of capital of 17.1 percent. The relevant level of net working capital for the project is expected to be 20,000 dollars immediately (at year 0); 20,000 dollars in 1 year; and 0 dollars in 2 years. Relevant expected revenue, costs, depreciation, and cash flows from capital spending in years o, 1, and 2 are presented in the following table (in dollars). The tax rate is 50 percent. What is the net present value of this project? Year 0 Year 1 Year 2 Revenue $0 216,000 216,000 Costs $0 57,000 57,000 Depreciation $0 35,000 35,000 Cash flows from capital spending -76,000 0 15,000 Number
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