Gateway Communications is considering a project with an initial fixed assets cost of $1.55 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 $ 240,000. The project will not change sales but will reduce operating costs by $399,000 per year. The tax rate is 21 percent and the required return is 11.5 percent. The project will require $52,000 in net working capital, which will be recouped when the project ends.
Gateway Communications is considering a project with an initial fixed assets cost of $1.55 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 $ 240,000. The project will not change sales but will reduce operating costs by $399,000 per year. The tax rate is 21 percent and the required return is 11.5 percent. The project will require $52,000 in net working capital, which will be recouped when the project ends.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 17P
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