Question 17 Year Unlevered net income $0 $125,000 $125,000 $125,000 CAPEX -$1,200,000 10 10 10 NWC -$355,000 Depreciation Salvage value FCF Denial & Phranque Co. want to invest in a new machine and consult you to help finish their capital budget. You are provided the following information: There is an interest expense of $25,000 per year. The machine will cost $1,200,000 and will be fully depreciated over three years. At the end of the three years the machine will be sold for $100,000. The project will require net working capital of $355,000 today and will be entirely recovered at the end of the third year. If the company has a cost of capital of 8% and a tax rate of 30%, what is the NPV of the project and should Denial & Phranque Co. accept the project? (4 marks) O The NPV is -$146,451 and the project should be rejected. O The NPV is $135,355 and the project should be accepted. O The NPV is $159,169 and the project should be rejected. O The NPV is $71,000 and the project should be accepted. 10