Problem: Equipment has a 3 year tax life, no depreciation by the straight line method over the project's 3 year life, and will have zero salvage value. No new working capital is required. Revenues and operating cost are expected to be constant over the project's 3 year life. What is the NPV?
Cash Flow is constant over the 1-3 years.
WACC 10%
Net investment cost (depreciable basis) $65,000
Straight line depreciation rate 33.33%
Sales revenue $70,000
Operating costs excl. depreciation $25,000
Tax rate 35%