Author Question: Party Place is considering a new investment whose data are shown below. Assume the equipment that ... (Read 13 times)

xman15. · **on:** Aug 7, 2023

Party Place is considering a new investment whose data are shown below. Assume the equipment that would be used would have a constant annual capital cost allowance over the project’s 3-year life and a zero salvage value. This project would require some additional working capital that would be recovered at the end of the project’s life. Revenues and cash operating costs are expected to be constant over the project’s 3-year life. What is the project’s NPV? (Hint: Cash flows are constant in Years 1 to 3. CCA is modified to smooth out the calculations.)

WACC	11%
Net investment in fixed assets (basis)	$85,920
Required new working capital	$20,000
Annual capital cost allowance	$28,640
Sales revenues, each year	$82,000
Cash operating costs, each year	$30,000
Tax rate	37%

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$10,112

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$15,286

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$12,584

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$13,913

hillard sane · **Reply #1 on:** Aug 7, 2023

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