Problem
TWU Communications is considering a project with an initial fixed asset cost of $2.168 million which will be depreciated straight-line to a zero book value over the 10-year life of the project. At the end of the project the equipment will be sold for an estimated $495,000. The project will not directly produce any sales but will reduce operating costs by $634,000 a year. The tax rate is 30 percent. The project will require $128,000 of net working capital which will be recouped when the project ends. What is the net present value at the required rate of return of 15 percent?