q3

Project: new line of stoves The plant and equipment required for producing the new line of stoves costs $100,000 (today) and will be depreciated down to zero over 20 years using straightline depreciation. The plant and equipment is sold for $50,000 at the end 12 years. Net working capital increases by $20,000 at the beginning of the project (year 0) and it is reduced back to its original level in the final year. The tax rate is 20 percent and the discounting rate for the project is 10%. What is the amount of capital gain or capital loss resulting from the sale of the plant at equipment at the end of year 12