Consider two-year project with annual estimated revenues

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Reference no: EM132072663

Consider a two-year project with annual estimated revenues of $500,000 and annual estimated operating costs of $250,000. These cash flows begin at the end of the first year. The project requires an initial capital expenditure of $200,000 which you can depreciate in a straight line over two years and has zero salvage value. The project requires a $150,000 working capital investment incurred immediately and recovered after the two years. The project requires use of land that you could sell today for a post-tax profit of $300,000, but you think you will be able to sell it for the same mount when the project is complete. What is the NPV of the project? Assume a 20% tax rate and a 12% opportunity cost of capital.

Reference no: EM132072663

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