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XYZ inc. considers an investment project that requires $500,000 in new equipment and $40,000 in extra NWC at the beginning of the project. The NWC

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XYZ inc. considers an investment project that requires $500,000 in new equipment and $40,000 in extra NWC at the beginning of the project. The NWC will need to be increase by another $5,000 at the end of year t=2 and it will remain at the $45,000 level until the project is completed. The projects will lead to an increase in operating pre-tax net revenue of $180,000 per year and will last for 4 years. At the end of the project (beginning of year t=5), the equipment can be sold for the salvage value of $200,000. The equipment belongs to the CCA class with d=30%, the corporate income tax rate is 40%, and the cost of capital is 8% Problem 11: By how much NPV would have changed if XYZ would not have to increase NWC by $5000 at t=2

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