Question
In: Finance
ndigo River Entertainment is considering a project that would last for 2 years. The project would...
ndigo River Entertainment is considering a project that would last for 2 years. The project would involve an initial investment of 79,000 dollars for new equipment that would be sold for an expected price of 65,000 dollars at the end of the project in 2 years. The equipment would be depreciated to 23,000 dollars over 4 years using straight-line depreciation. In years 1 and 2, relevant annual revenue for the project is expected to be 77,000 dollars per year and relevant annual costs for the project are expected to be 29,000 dollars per year. The tax rate is 50 percent and the cost of capital for the project is 8.46 percent. What is the net present value of the project?
Solutions
Expert Solution
Following is the Excel sheet of calculation of NPV of the project:-
Following is the Formula sheet of above excel worksheet for easy understanding of the calculations:-
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