The Iowa City transit is considering investing into another bus to serve a new route. The...

The Iowa City transit is considering investing into another bus to serve a new route. The bus will cost $60,000 (initial investment in Yr 0). Revenues are expected to be $150,000 in the first year, and then grow by 5% each year. Costs are expected to be 80% of sales. Iowa City transit plans to operate the bus for 3 years. The project will require an immediate (Yr 0) investment of $3000 in working capital with an additional investment of $500 in year one. All working capital will be returned in year 3. Assume 3-year straight-line depreciation (no salvage value), and a tax rate of 30%. What is the NPV of the project assuming a discount rate of 15%?

Expert Solution

Net Present Value = $ (10,976.49)

jeff jeffy answered 2 years ago

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