Answered step by step
Verified Expert Solution
Question
1 Approved Answer
XYZ is considering a project that would last for 3 years and have a cost of capital of 21.90 percent. The relevant level of net
XYZ is considering a project that would last for 3 years and have a cost of capital of 21.90 percent. The relevant level of net working capital for the project is expected to be $1,711.60 immediately (at year 0); $4,680.00 in 1 year; $15,600.00 in 2 years; and $0.00 in 3 years. Relevant expected revenue, costs, depreciation, and cash flows from capital spending in years 0, 1, 2, and 3 are presented in the following table. The tax rate is 46.40 percent. What is the net present value of this project?.
Year 0 | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|
Revenue | $ 0.00 | $11,400.00 | $10,700.00 | $10,300.00 |
Costs | $ 0.00 | $3,820.00 | $3,910.00 | $4,700.00 |
Depreciation | $ 0.00 | $1,790.00 | $2,070.00 | $1,700.00 |
Cash flows from capital spending | $-7,530.00 | $1,890.00 | $ 70.00 | $3,400.00 |
$6319.13 (plus or minus $10) | ||
$2263.70 (plus or minus $10) | ||
$-1536.26 (plus or minus $10) | ||
$8030.31 (plus or minus $10) | ||
None of the above is within $10 of the correct answer |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started