# A project requires an initial investment in equipment of \$90,000 and then requires an initial investment in working capital of \$10,000 (at t = 0). You expect the project to produce sales revenue of \$120,000 per year for three years. You estimate manufacturing costs at 60% of revenues. (Assume all revenues and costs occur at year-end, i.e., t = 1, t = 2, and t = 3.) The equipment depreciates using straight-line depreciation over three years. At the end of the project, the firm can sell the equipment for \$10,000 and also recover the investment in net working capital. The corporate tax rate is 30% and the cost of capital is 15%. Calculate the NPV of the project:

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A project requires an initial investment in equipment of \$90,000 and then requires an initial investment in working capital of \$10,000 (at t = 0). You expect the project to produce sales revenue of \$120,000 per year for three years. You estimate manufacturing costs at 60% of revenues. (Assume all revenues and costs occur at year-end, i.e., t = 1, t = 2, and t = 3.) The equipment depreciates using straight-line depreciation over three years. At the end of the project, the firm can sell the equipment for \$10,000 and also recover the investment in net working capital. The corporate tax rate is 30% and the cost of capital is 15%. Calculate the NPV of the project: