Question

Mustang Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $277,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years. Operating revenues from the facility are expected to be $112,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 3 percent. Production costs at the end of the first year will be $37,000, in nominal terms, and they are expected to increase at 4 percent per year. The real discount rate is 6 percent. The corporate tax rate is 34 percent.
   
Calculate the NPV of the project.

Answer 1

Solution:-

To Calculate NPV of the Project-

NPV of the Project is amounting to $1,00,916.

If you have any query related to question then feel free to ask me in a comment.Thanks.