Garden-Grow Products Is Considering a New Investment Whose Data Are

Garden-Grow Products is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project's 3-year life, would have a zero salvage value, and would require some additional 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 life. What is the project's NPV? (Hint: Cash flows are constant in Years 1 to 3.) $\begin{array}{lr}\text { Project cost of capital ( } r \text { ) } & 10.0 \% \\\text { Net investment in fixed assets (basis) } & \$ 75,000 \\\text { Required new working capital } & \$ 15,000 \\\text { Straight-line deprec. rate } & 33.333 \% \\\text { Sales revenues, each year } & \$ 75,000 \\\text { Operating costs (excl. deprec.) , each year } & \$ 25,000 \\\text { Tax rate } & \$ 35.0 \%\end{array}$

A) $23,852
B) $25,045
C) $26,297
D) $27,612
E) $28,993

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free