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PERIOD 0    1 2 3   4 EBIT   $46,000 $57,000 $70,000 $80,000 The above table illustrates...

PERIOD

0    1 2 3   4

EBIT   $46,000 $57,000 $70,000 $80,000

The above table illustrates earnings before interest and taxes for a capital investment project. Additional information for this project:

initial cost of the investment = $600,000

no change in net working capital

tax rate = 32.0% depreciation = accelerated using the MACRS factors: 0.33330, 0.44450, 0.1481, 0.0741

projected cash flow from salvage = $0

projected erosion costs = $30,000 in Year 1 and $40,000 in Year 2 If the opportunity cost of capital is 11.2%, what is the net present value of this project?

Solutions

Expert Solution

Net present Value of the Project is -$354,121.47


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