DeVault Services Recently Hired You as a Consultant to Help

question 8

Multiple Choice

DeVault Services recently hired you as a consultant to help with its capital budgeting process.The company is considering a new project whose data are shown below.The equipment that would be used has a 3-year tax life,would be depreciated by the straight-line method over its 3-year life,and would have a zero salvage value.No new working capital would be required.Revenues and other operating costs are expected to be constant over the project's 3-year life.What is the project's NPV? $$\begin{array} { l r } \text { Risk-adjusted WACC } & 10.0 \% \\\text { Net investment cost (depreciable basis) } & \$ 65,000 \\\text { Straight-line deprec. rate } & 33.3333 \% \\\text { Sales revenues, each year } & \$ 65,500 \\\text { Operating costs (excl. deprec.) , each year } & \$ 25,000 \\\text { Tax rate } & 35.0 \%\end{array}$$

• A)$15,740
• B)$16,569
• C)$17,441
• D)$18,359
• E)$19,325

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