Temple Corp. is considering a new project whose data are shown below. The equipm

Question

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 depr. rate 33.3333%
Sales revenues, each year $73,500
Operating costs (excl. depr.), each year $25,000
Tax rate 35.0%

Explanation / Answer

B $27,417

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