Party Place is considering a new investment whose data are shown below. The equipment that would be used would have a constant annual capital cost allowance percentage of 30% over the project's 3 year life and a before-tax salvage value of $50,000. This project would require some additional working capital. Revenues jump by $10,000 in year 2 and remain at this level in year 3. Cash operating costs are expected to change with inflation each year over the project's 3 year life. Party Place is totally unlevered. What is the project's NPV?
WACC 10.0%
Net investment in fixed assets (basis) $100,000
Required new working capital $10,000
Annual capital cost allowance 30%
Sales revenues, year 1 $70,000
Cash operating costs, year 1 $25,000
Inflation rate per year 5%
Tax rate 35.0%