Green Forest Consulting is considering a project that would last for 2 years and have...
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Green Forest Consulting is considering a project that would last for 2 years and have a cost of capital of 5.27 percent. The relevant level of net working capital for the project is expected to be 16,000 dollars immediately (at year 0); 30,000 dollars in 1 year; and 0 dollars in 2 years. Relevant expected revenue, costs, depreciation, and cash flows from capital spending in years 0, 1, and 2 are presented in the following table (in dollars). The tax rate is 50 percent. What is the net present value of this project?
|
| Year 0 | Year 1 | Year 2 |
| Revenue | $0 | 162,000 | 162,000 |
| Costs | $0 | 55,000 | 55,000 |
| Depreciation | $0 | 37,000 | 37,000 |
| Cash flows from capital spending | -78,000 | 0 | 15,000 |
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