The project cost of capital is 7.7%. The tax rate is 17%. How much lower is the project NPV calculated based on expected cash flows vs the project NPV based on expected NI?

Assignment Question

An all equity financed project has a 5-year life and is expected to generate the following net income: year 1: $52 year 2: $71 year 3: $88 year 4: $105 year 5: $123 The project has no working capital.

The production equipment for the project was purchased at time 0 for $912 and depreciated straightline to $0 over the life of the project. The equipment is sold for $52 at the end of the project. The project cost of capital is 7.7%. The tax rate is 17%. How much lower is the project NPV calculated based on expected cash flows vs the project NPV based on expected NI?

Give your answer to the nearest whole dollar. An all equity financed project has a 5-year life and is expected to generate the following net income: year 1: $85 year 2: $83 year 3: $85 year 4: $102 year 5: $135 The project has no working capital. The production equipment for the project was purchased at time 0 for $936 and depreciated straightline to $0 over the life of the project. The equipment is sold for $69 at the end of the project. The project cost of capital is 10.1%. The tax rate is 13%.

How much lower is the project NPV calculated based on expected cash flows vs the project NPV based on expected NI? Give your answer to the nearest whole dollar. Selected Answer: [None Given] Correct Answer: 191 ± 1