Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Sub-Prime Loan Company is thinking of opening a new office, and the key data are shown below. The company owns the building that would be

image text in transcribed
Sub-Prime Loan Company is thinking of opening a new office, and the key data are shown below. The company owns the building that would be used, and it could sell it for $100,000 after taxes if it decides not to open the new office. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated att 0. At the end of the project's life, the equipment would have zero salvage value. No change in net operating working capital (NOWC) would be required for the project. Revenues and operating costs would be constant over the project's 3-year life. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.) Do not round the intermediate calculations and round the final answer to the nearest whole number WACC 10.09 Opportunity cost $100,000 Equipment cost $65,000 Annual sales revenues $116,000 Annual operating costs $25,000 Tax rate 254 122,592 520,970 $21.575 0.512,707 12.16

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Investing

Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk

14th Edition

0135175216, 978-0135175217

More Books

Students also viewed these Finance questions

Question

Explain the process of Human Resource Planning.

Answered: 1 week ago

Question

Many different people can conduct performance appraisals.

Answered: 1 week ago