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Calculate the npv of the project

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Question - A project requires an initial investment of $200,000 and expects to produce gross operating income of $120,000 per year for two years.

The corporate tax rate is 30%. The assets will depreciate using the MACRS - 3-year schedule: (t = 1, 33%); (t = 2: 45%); (t = 3: 15%); (t = 4: 7%).

The company's tax situation is such that it can use all applicable tax shields.

The opportunity cost of capital is 12%.

Assume that cash flows occur at the end of each year (i.e., at t = 1 and t = 2) and that the asset can sell for book value at the end of the project. Calculate the NPV of the project (approximately)?

Reference no: EM133121463

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