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B DE F G H M N 1 ABC company is thinking of opening...

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Finance

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B DE F G H M N 1 ABC company is thinking of opening a new warehouse, and the key data are shown below. 2 The company owns the building that would be used, and it could sell it for $100,000 after taxes if it decides not to open the new warehouse 3 The equipment for the project would be depreciated by the straight-line method over the project's 3-year life, after which it would be worth nothing and thus it would have a zero salvage value 4 No new working capital would be required, and revenues and other operating costs would be constant over the project's 3-year life. What is the project's NPV? 5 6 WACC 10% 7 Opportunity cost $100,000 8 Net equipment cost (depreciable basis) $65.000 9 Straight-line deprec. rate for equipment 33.33% 10 Sales revenues, each year $123,000 11 Operating costs (excl. deprec.), each year $25,000 12 Tax rate 35% 13 14 15

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