Question

old Corporation is considering a project. The data for the 3 year project are given below. Should the manager of Gold Corporation accept this project? Use the NPV criteria to make your decision.

Sales revenue, each year: $50,000
Variable costs, each year: $12,000
Fixed costs, each year: $0
Sunk costs: $30,000
Initial outlay: $45,000
Depreciation, each year: $15,000
Tax rate: 20%
WACC: 12%

		The project should not be accepted because it has an NPV of -$15,179
		The project should be accepted because it has an NPV of $35,221
		The project should be accepted because it has an NPV of $41,441
		The project should be accepted because it has an NPV of $50,359
		The project should be accepted because it has an NPV of $125,221

Answer 1

Net present value:

The project should be accepted because it has an NPV of $35,221

Formulas: