Kids\' Place is considering a new investment whose data are shown below. The equ
ID: 2671020 • Letter: K
Question
Kids' Place is considering a new investment whose data are shown below. The equipment that would be used has a 3-year tax life, would be depreciated on a straight line basis over the project's 3-year life, would have zero salvage value, and would require some new working capital that would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3-year life. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.)
WACC=10 %
Net equipment cost(depreciable basis)=$65,000
Required new working capital=10,000
Straight line depreciation rate=33.33%
Sales revenues=$70,000
Operating costs ecluding depreciation=$25,000
Tax Rate=35%
as far as plugging the numbers into a a financial calulator..would I enter:
CF0= -75,000?
CF1= 36,832.57
CF2=36,832.57
CF3=unsure
I understand how to find NPV once i have each of the cash flows, but I am unsure how to calulate the value of CF3
Explanation / Answer
the answer can be found out from calculator. It evaluates to $26,553.97
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