Question

Cookie Cutter Corp. is considering a new project whose data are shown below. The equipment that would be used has a 5-year tax life, would be depreciated by the straight-line method over its 5-year life, and would have a zero salvage value. No change in net operating working capital would be required. Revenues and other operating costs are expected to be constant over the project's 5-year life. What is the project's NPV? Do not round the intermediate calculations and round the final answer to the second decimal place.

• Risk-adjusted WACC = 8.6%
• Net investment cost (depreciable basis) = $140,000
• Straight-line depreciation rate = 20.00% per year
• Cash Sales revenues, each year = $71,000
• Annual cash operating costs (excluding depreciation) = $25,000
• Tax rate = 22.0%

Answer 1

Solution :

The project's NPV is = $ 25,232.28

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.