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In: Finance
The Glenn Corporation is considering a four-year project with the following data; What is the project...
The Glenn Corporation is considering a four-year project with the following data; What is the project NPV using wacc of 5.4%?
Additional investment in fixed assets but no additional working capital $100,000
Straight-line depreciation rate 25% but zero salvage value after four years
Annual sales revenues (constant for every year) $75,000
Operating costs (excl. depreciation) (also constant) $25,000
Tax rate 21.0%
Solutions
Expert Solution
Depreciation = 100000 * 25% = 25000
Annual cash flows = (Revenues - Costs) * (1 - Tax rate) + Depreciation * Tax rate
= (75000 - 25000) * (1 - 0.21) + 25000 * 0.21
= 44750
Present value of cash flows = 44750 * ((1- (1+5.40%)^-4)/5.40%
= 44750*3.513249
= 157217.90
NPV = Present value of cash flows - Initial investment
= 157217.90 - 100000
= 57217.90
jeff jeffy answered 2 years agoRelated Solutions
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