# 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

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

Expert's answer

## Comments

Assignment Expert10.04.14, 15:58GRACE16.02.13, 19:03Revenue 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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