Gateway Communications is considering a project with an initial fixed assets cost of $1.50 million that will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project the equipment will be sold for an estimated $245,000. The project will not change sales but will reduce operating costs by $409,000 per year. The tax rate is 40 percent and the required return is 12.7 percent. The project will require $54,500 In net working capital, which will be recouped when the project ends. What is the project's NPV?

Gateway Communications is considering a project with an initial fixed assets cost of $1.50 million that will be depreciated straight-line to a zero book value over the 9-year life of the project. At the end of the project the equipment will be sold for an estimated $245,000. The project will not change sales but will reduce operating costs by $409,000 per year. The tax rate is 40 percent and the required return is 12.7 percent. The project will require $54,500 In net working capital, which will be recouped when the project ends. What is the project's NPV?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 7PROB

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Question

Check my
MC algo 8-33 Cash Flows And NPV
Gateway Communications is considering a project with an initial fixed assets cost of $1.50 million that will be depreciated straight-line to a zero book
value over the 9-year life of the project. At the end of the project the equipment will be sold for an estimated $245,000. The project will not change sales
but will reduce operating costs by $409,000 per year. The tax rate is 40 percent and the required return is 12.7 percent. The project will require $54,500
in net working capital, whlch will be recouped when the project ends. What is the project's NPV?
Multiple Choice
$133,641
$176,342
$182,220
$169,560
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