Thomas Media is considering some new equipment whose data are as shown below. The equipment has a 3-year tax life and would be fully depreciated by the MACRS method over 3 years, but it would have a positive pre-tax salvage value at the end of Year-3, when the project would be closed down. Also, additional net operatiny working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. WHAT IS THE PROJECT's NPV?

Net investment in fixed assets $70,000

Required a deduction in net

operating working capital. $10,000

Depreciation (MACRS). 33% in year 1,

45% in year 2,

15% in year 3,

7% in year 4

Earnings before tax &

depreciation. $45,000

Expected pre-tax

salvage value. $5,000

Tax rate. 35%

WACC. 10%

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