TexMex Food Company is considering a new salsa whose data are shown below.The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required.Revenues and other operating costs are expected to be constant over the project's 3-year life.However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows.What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.)
WAAC = 10%
Pre tax cash flow reduction for other products(cannibalization) = $5,000
Investment costs(depreciable basis) = $80,000
Straight line depr rate = 33.333%
Sales revenues, each for 3 years = $67,500
Annual operating costs (excl deprec) = $25,000
Tax rate = 35.0%
A)$3,636
B)$3,828
C)$4,019
D)$4,220
E)$4,431

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The Answer of TexMex Food Company is considering a new salsa whose data are shown below.The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required.Revenues and other operating costs are expected to be constant over the project's 3-year life.However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows.What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.)
WAAC = 10%
Pre tax cash flow reduction for other products(cannibalization) = $5,000
Investment costs(depreciable basis) = $80,000
Straight line depr rate = 33.333%
Sales revenues, each for 3 years = $67,500
Annual operating costs (excl deprec) = $25,000
Tax rate = 35.0%
A)$3,636
B)$3,828
C)$4,019
D)$4,220
E)$4,431

TexMex Food Company Is Considering a New Salsa Whose Data