Kate is evaluating an idea to open her own business. The initial investment is estimated to...

Kate is evaluating an idea to open her own business. The initial investment is estimated to be $100,000. The investment horizon is 5 years. She will use a 5-year straight-line depreciation schedule, with an ending book value of zero for the assets. The salvage value for the assets at the end of the project is $20,000. The initial working capital requirement is $10,000 and the working capital remains to be $10,000 each year. Kate expects to generate the revenues of $80,000 with the costs of $40,000 each year during the 5-year time period. The tax rate is 21%. Compute the net present value (NPV) for this investment using the required return of 10%.

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jeff jeffy answered 1 year ago

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