Transcribed Image Text
Thomson Media is considering some new equipment whose data areshown below. The equipment has a 3-year tax life and would be fullydepreciated by the straight-line method over 3 years, but it wouldhave a positive pre-tax salvage value at the end of Year 3, whenthe project would be closed down. Also, additional net operatingworking capital would be required, but it would be recovered at theend of the project's life. Revenues and other operating costs areexpected to be constant over the project's 3-year life. What is theproject's NPV? WACC 10.0% Net investment in fixed assets(depreciable basis) $70,000 Required net operating working capital$10,000 Straight-line depreciation rate 33.333% Annual salesrevenues $75,000 Annual operating costs (excl. depreciation)$30,000 Expected pre-tax salvage value $5,000 Tax rate 35.0% A.$20,762 B. $21,584 C.$23,005 D.$24,155 E.$25,363