Lakeside Winery Is Considering Expanding Its Winemaking Operations

Lakeside Winery is considering expanding its winemaking operations.The expansion will require new equipment costing $708,000 that would be depreciated on a straight-line basis to a zero balance over the four-year life of the project.The equipment can be sold for $220,000 after the four years.The project requires $46,000 initially for net working capital, all of which will be recouped at the end of the project.The projected operating cash flow is $211,500 a year.What is the net present value of this project if the relevant discount rate is 13 percent and the tax rate is 34 percent?

A) -$7,632.77
B) -$8,309.18
C) -$10,747.11
D) $7,008.14
E) $1,309.54

Correct Answer:

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