Bauerkemper Inc. is considering a project that would require an initial investment of $924,000 and would have a useful life of 7 years. The annual cash receipts would be $693,000 and the annual cash expenses would be $347,000. The salvage value of the assets used in the project would be $92,000. The company's tax rate is 30%. For tax purposes, the entire initial investment without any reduction for salvage value will be depreciated over 5 years. The company uses a discount rate of 17%.
Required:
Compute the net present value of the project.

Question

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The Answer of Bauerkemper Inc. is considering a project that would require an initial investment of $924,000 and would have a useful life of 7 years. The annual cash receipts would be $693,000 and the annual cash expenses would be $347,000. The salvage value of the assets used in the project would be $92,000. The company's tax rate is 30%. For tax purposes, the entire initial investment without any reduction for salvage value will be depreciated over 5 years. The company uses a discount rate of 17%.
Required:
Compute the net present value of the project.