Weston Clothing Company is considering manufacturing a new style of shirt, whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other Weston's products and would reduce their pre-tax annual cash flows. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.) WACC 10.0% Pre-tax cash flow reduction for other products (cannibalization) $5,000 Investment cost (depreciable basis) $80,000 Straight-line deprec. rate 33.333% Sales revenues, each year for 3 years $67,500 Annual operating

Weston Clothing Company is considering manufacturing a new style of shirt, whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other Weston's products and would reduce their pre-tax annual cash flows. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.)

WACC	10.0%
Pre-tax cash flow reduction for other products (cannibalization)	$5,000
Investment cost (depreciable basis)	$80,000
Straight-line deprec. rate	33.333%
Sales revenues, each year for 3 years	$67,500
Annual operating costs (excl. deprec.)	$25,000
Tax rate	35.0%

Question 10 options:

	$3,636
	$3,828
	$4,019

costs (excl. deprec.) $25,000 Tax rate 35.0% Question 10 options: $3,636 $3,828 $4,019