Alberta Pasta is considering producing a new type of pasta. The required equipment has a constant capital cost allowance
over its 3-year life with a zero salvage value. No new working capital would be required. Revenues and cash operating costs
are expected to be constant over the project's 3-year life. However, this project would compete with other Alberta
Pasta products and would reduce the company's pre-tax annual cash flows. What is the project's NPV?
WACC
10.0%
Pre-tax cash flow reduction in other products
15,000
Net investment in fixed assets
65,000
Annual capital cost allowance
31,000
Sales revenues, each year
80,000
Cash operating costs, each year
25,000
Tax rate
25.0%
O a. 93,879
O b. 37,750
O c. 28,879
O d. 29,325