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Answer to Question #6365 in Economics of Enterprise for lamarcus streeter

Question #6365
4. Temple Corp. 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 its 3-year life, and would have a zero 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. What is the project’s NPV?
Risk-adjusted WACC 10.0%
Net investment cost (depreciable basis) $65,000
Straight-line deprec. rate 33.3333%
Sales revenues, each year $65,500
Operating costs (excl. deprec.), each year $25,000
Tax rate 35.0%
a. $15,740
b. $16,569
c. $17,441
d. $18,359
e. $19,325
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Assignment Expert
10.04.14, 15:58

GRACE
16.02.13, 19:03

Revenue 65500
Operating costs (25000)
Depreciation (21667)
_______
EBIT 18833
TAX 35% (6592)
_______
EBITDA 12242
Depreciation 21667
_______
CF 33908

-65000 + 33908/1.10 + 33908/1.10^2 + 33908/1.10^3 = 19325

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