Does this change your decision on the project


Calculate the NPV for the following capital budgeting proposal: $100,000 initial cost, to be depreciated straight-line over five years to an expected salvage value of $5,000, 35% tax rate, $45,000 additional annual revenues, $15,000 additional annual expense, $8,000 additional investment in working capital, 11% cost of capital. Recalculate the NPV for the proposal, now assuming that the $45,000 in annual revenues will grow at a 6% annual rate and that the $15,000 in annual expenses will grow at a 5% annual rate. Does this change your decision on the project?

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Finance Basics: Does this change your decision on the project
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