X Corp. is considering a new project which will have costs, revenues, etc. as shown by the table below.
To carry out the project, X Corp. has to buy (at year 0) new equipment worth $600,000, which will be depreciated by straight-line over three years (assume there is no salvage value).
If the Net Working Capital at year 0 is $0, the cost of capital is 8.0%, and the average tax rate is 25%, the marginal tax rate is 35%, what is the net present value (NPV) of this project?
Year 1 Year 2 Year 3
Revenues 700.000 700,000 700,000
COGS 300.000 300,000 300,000
Expenses 100,000 100,000 100,000
Net Working Cap. 0 30,000 0