Question
Your boss asked you to evaluate a project with an infinite life. Sales and costs project to $1,500 and $800 per year, respectively. (Assume sales
Your boss asked you to evaluate a project with an infinite life. Sales and costs project to $1,500 and $800 per year, respectively. (Assume sales and costs occur at the end of the year [i.e., profit at the end of year one].) There is no depreciation and the tax rate is 21 percent. The real required rate of return is 10 percent. The inflation rate is 4 percent and is expected to be 4 percent forever. Sales and costs will increase at the rate of inflation. If the project costs $4,000, what is the NPV? (The answer should be rounded to the nearest cent.)
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