ABC Corp, is considering a new project which data are shown below. The equipment
ID: 2691202 • Letter: A
Question
ABC Corp, is considering a new project which 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 its 3-year life, and would have a 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. The marketers expect that the project's implementation will decrease the sales volume of firm's existing products by $10000 each year. The profit margin of these products is 25%. What is the project's NPV?Explanation / Answer
PV = 0.3/1.1 + 0.3/1.1^2 + 0.3/1.1^3 = 0.993989 => $993989