Depreciated on a straight-line basis over seven years

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Reference no: EM131315068

Sanders Enterprises, Inc., has been considering the purchase of a new manufacturing facility for $274,000. The facility is to be fully depreciated on a straight-line basis over seven years. It is expected to have no resale value after the seven years. Operating revenues from the facility are expected to be $109,000, in nominal terms, at the end of the first year. The revenues are expected to increase at the inflation rate of 4 percent. Production costs at the end of the first year will be $34,000, in nominal terms, and they are expected to increase at 5 percent per year. The real discount rate is 7 percent. The corporate tax rate is 39 percent. Calculate the NPV of the project.

Reference no: EM131315068

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