Question

In: Finance

Consider a capital expenditure project that has forecasted revenues equal to $80,000 per year; cash expenses...

Consider a capital expenditure project that has forecasted revenues equal to $80,000 per year; cash expenses are estimated to be $25,000 per year. The cost of the project equipment is $120,000, and the equipment’s estimated salvage value at the end of the project is $10,000. The equipment’s $120,000 cost will be depreciated on a straight-line basis to $0 over an 8-year estimated economic life. Assume that the project requires an initial $10,000 working capital investment. The company can recover this working capital investment at the end of the project. The company’s marginal tax rate is 35%. Calculate the project’s net present value using a 14% discount rate

Solutions

Expert Solution

Answer:- NPV= $65977.64

Explanation:-

Following is the excel sheet showing the calculation of NPV :-

Following is the Formula sheet of above excel sheet for easy understanding of the calculation :-


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