Question
You will use the following information to answer 3 different questions (I will repeat it again, but it is the same information; only the question
You will use the following information to answer 3 different questions (I will repeat it again, but it is the same information; only the question at the end is different). A project requires the purchase of an asset with an initial cost of $500,000. The project will have a life of 8 years. The asset will be depreciated with a CCA rate of 20% and it is expected to be sold at $60,000 at the end of the project. Sales revenues are expected to be $90,000 per year over the course of the project. Variable costs will be 15% of sales revenue and fixed costs are expected to be $15,000 per year. The firm also needs to invest $20,000 in net working capital at the beginning of the project, which will be recovered when the project ends. $10,000 has been spent in the last month projecting the profitability of the new asset. Assume that the tax rate is 30% and the WACC is 10%. What is the NPV of this project?
-$175,235.27 | |
| -$163,154.38 |
| -$96,783.21 |
| $23,398.79 |
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