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?
$\begin{array} { l r } \text { Risk-adjusted cost of capital } & 10.0 \% \\\text { Net investhent cost (depreciable basis) } & \text { \$65,000 } \\\text { Straight-line deprec. rate } & 33.3333 \% \\\text { Sales revenue5, each year } & \$ 65,500 \\\text { Operating costs (excl. teprec.) , each year } & 35,000 \\\text { Terate } & 35 \%\end{array}$

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

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