Fin. Mgmt: Calculating N.P.V?
Swannee Resorts is considering a new project whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated by the straight line method over the project's 3 year life, and would have zero (0) salvage value. No new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life.
W.A.C.C. 10%
Net investment cost (depreciable basis) $65,000
Straight line depr'n rate 33.33%
Sales revenues $70,000
Operating costs excl. depr'n $25,000
Tax rate 35%
What is the project's N.P.V?