Problem:
Swanee Resorts 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 the project's 3 year life, and would have 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?
Wacc 10%
Net investment cost(depreciable basis) $65000
Straight Line depreciation rate 33.33%
Sales revenues $70,000
Operating costs excl. depreciation $25,000
Tax Rate 35%