hard · Principles of Finance capital-budgeting
An industrial project requires an initial investment of $10,000,000 and is expected to generate EBIT of $3,000,000 annually for 5 years. The equipment is depreciated straight-line to zero over 5 years, the tax rate is 21%, and there are no working capital requirements.
If the WACC is 10%, what is the NPV of the project, accounting for the depreciation tax shield?
- $681,350
- $614,457
- $1,228,914
- $6,566,000
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