Lakeside Winery is considering expanding its wine-making operations. The expansion will require new equipment costing $649,000 that would be depreciated on a straight-line basis to a zero balance over the 4-year life of the project. The estimated salvage value is $187,000. The project requires $38,000 initially for net working capital, all of which will be recouped at the end of the project. The projected operating cash flow is $198,500 a year. What is the net present value of this project if the relevant discount rate is 14 percent and the tax rate is 35 percent?

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The Answer of Lakeside Winery is considering expanding its wine-making operations. The expansion will require new equipment costing $649,000 that would be depreciated on a straight-line basis to a zero balance over the 4-year life of the project. The estimated salvage value is $187,000. The project requires $38,000 initially for net working capital, all of which will be recouped at the end of the project. The projected operating cash flow is $198,500 a year. What is the net present value of this project if the relevant discount rate is 14 percent and the tax rate is 35 percent?

Lakeside Winery Is Considering Expanding Its Wine-Making Operations