Question
XYZ inc. considers an investment project that requires $500,000 in new equipment and requires $40,000 investment in NWC that will be released at the end
XYZ inc. considers an investment project that requires $500,000 in new equipment and requires $40,000 investment in NWC that will be released at the end of the project. All investments are made on January 1 of the first year. The projects will lead to an increase in operating pre-tax net revenue of $150,000 per year for 6 years (end of each year). At the end of the project the equipment will have no salvage value. The equipment belongs to the CCA class with d=30%, the corporate income tax rate is 40% and the cost of capital is 10%
Q29 Find NPV of the project
Q30 By how much your answer in question 29 will increase if at the end the end of the project, the equipment can be sold for a salvage value of $100,000
Q31 By how much your answer in question 29 will decrease if the project would have required an additional $10,000 investment in NWC at t=3? Note that all NWC is released at the end of the project
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