What is the NPV of a 6-year project that costs $100,000,has annual revenues of $50,000 and costs of $15,000? Assume the investment can be depreciated for tax purposes straight-line over 6 years,the corporate tax rate is 35%,and the discount rate is 14%.
A) −$15,560.04
B) $11,151.08
C) $3,411.14
D) $14,782.09

Question

Quizplus · Accepted Answer

Annual cash flow = (revenues − costs) × (1 − tax rate) + (tax rate × depreciation) = (50,000 − 15,000) × (1 − 0.35) + (0.35 × 100,000 / 6) = $27,417NPV = −$100,000 + $27,417 × [1 / 0.14 −1 / (0.14 × 1.14⁶] = $11,151.08

What Is the NPV of a 6-Year Project That Costs