56%
60. DeVault Services recently hired you as a consultant to help with its capital budgeting process. The
company 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 cost of capital = 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