Question: Swannee Resorts is bearing in mind a new project whose data are shown below. The equipment that would be used has a three year tax life, would be depreciated by the straight line method over the project's three year life, & would have zero salvage value. No new working capital would be required. Revenues & other operating costs are expected to be constant over the project's three year life. Calculate the project's Net Present Value? Ignore small rounding differences between your answer & the choices given. [Hint: Cash flows are constant in Years 1-3.]
WACC = 10 percent
Net investment cost (depreciable basis) = $65,000
Straight line depreciation rate = 33.33 percent
Sales revenues = $70,000
Operating costs excl. depreciation = $25,000
Tax rate = 35 percent
[A] $24,354.87$25,189.71
[B] $26,599.05
[C] $22,156.24
[D] $23,791.14