Road Hawk Inc.is adding a new production line that will cost $720,000.The line will be depreciated on a straight- line basis over a 7-year period and will generate net cash flows of $160,000 in each of the 7 years.At the end of the project, it is expected the line can be sold as scrap for $10,000.If the firm's marginal tax rate is 40% and its required rate of return is 14 percent, what is the net present value of this project?
A)$70,091
B)-$27,920
C)$64,091
D)-$31,520

Question

Quizplus · Accepted Answer

NPV = -$720,000 + $160,000(4.288) + $10,000(0.6)(0.400) = -$31,520