Solve this: A project requires a capital expenditure of $$93$ million today. It is depreciable straight line to zero over $16$

years, but you expect to sell it $11$ years from now $($just after depreciating that year$)$ at price $$61$ million. Other

data is as follows $($income statement numbers are annual$)$:

The project's cost of capital is $10\%,$ and the tax rate is $25\%.$ What is the NPV$?$ Report an answer in $ millions

that is correct to at least three digits after the decimal. The NPV is $ million Like this.

Here:

A project requires a capital expenditure of $$84$ million today. It is depreciable straight line to zero over $14$ years,

but you expect to sell it $10$ years from now $($just after depreciating the ${10}^{th}$ year$)$ at price $$45$ million. Other data is

as follows $($income statement numbers are annual$)$:

The project's cost of capital is $9\%,$ and the tax rate is $40\%.$ What is the NPV$?$

Ex solution:

First, in this problem NWC$=$Inventory $+$ Cash $+$ Accounts Receivable $-$ Accounts Payable. For years $1$ through $10,$ that

is $1\mathrm{.}3+\mathrm{.}4+1\mathrm{.}2-2=\mathrm{.}9M.$ Also, depreciation $=84\frac{M}{14}=6M$ each year. Notice that the book value of the fixed assets is $84-$

${10}^{**}6=24M$ at the time of the sale. Then tax on the sale is $(45-24{)}^{**}\mathrm{.}4=8\mathrm{.}4M,$ so that after$-$tax salvage is $45-8\mathrm{.}4=36\mathrm{.}6M.$

Operating cash flow Rev$-$OpExp