Suppose a six-year project requires an initial capital investment of $425,000 and an initial net...
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Suppose a six-year project requires an initial capital investment of $425,000 and an initial net working capital investment of $50,000. The project is expected to provide operating revenue of $270,000 per year. The associated operating costs are expected to be $130,000 per year. The capital asset belongs to Class 9 and has a CCA rate of 30 percent. The asset is expected to sell for $40,000 when the project terminates. Assume the asset class remains open when the asset is sold. The firm's marginal tax rate is 40 percent and cost of capital is 8 percent. What impact would it have on the project's NPV if the cost of capital were 10 percent? Question 12 options: a) NPV decreases by 23.14% b) NPV decreases by 38.04% c) NPV decreases by 48.20% d) NPV decreases by 61.41%
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