Allexis firm is considering some new equipment whose data are shown below. The equipment has...
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Allexis firm is considering some new equipment whose data are shown below. The equipment has a 3-year tax life depreciated by the straight-line method over 3 the years; it has a positive pre-tax salvage value at the end of Year 3, when the project would be closed down. A new working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? WACC (interest rate) 10.0% Net investment in fixed assets (depreciable basis) $70,000 Required new working capital $10,000 Straight-line deprec. rate 33.333% Sales revenues, each year $75,000 Operating costs (excl. deprec.), each year $30,000 Expected pretax salvage value $5,000 Tax rate 30.0%
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