Question
Redmond Incorporated, with a tax rate of 26% and a weighted average cost of capital of 11.3%, is looking at a project that requires an
Redmond Incorporated, with a tax rate of 26% and a weighted average cost of capital of 11.3%, is looking at a project that requires an outlay of $150,000 for equipment at t = 0, that is to be depreciated straight-line (33.33% per year) over a three-year period, and not expected to have salvage value after three years. It also requires an expenditure for $30,000 working capital which can be recovered in year three. There is an expectation that the project will bring in an additional $140,000 revenue with additional operating costs, not including depreciation) of $60,000 every year for the next three years. What is the net present value of this project? Answer to the nearest dollar and no $ sign.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started