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XYZ inc. considers an investment project that requires $200,000 in new equipment and $30,000 in...

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Finance

XYZ inc. considers an investment project that requires $200,000 in new equipment and $30,000 in extra NWC at the beginning of the project. The NWC will need to be increase by another $10,000 at the end of year t=1 and it will remain at the $40,000 level until the project is completed. The projects will lead to an increase in operating pre-tax net revenue of $75,000 per year and will last for 3 years. At the end of the project (beginning of year t=6), the equipment can be sold for the salvage value of $70,000. The equipment belongs to the CCA class with d=30%, the corporate income tax rate is 40%, and the cost of capital is 7%. Find PV of the effect of all changes in NWC not including the original $30,000 increase before the start of the project

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