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Homework answers / question archive / Black Horse Inc
Black Horse Inc. is evaluating adding a new product and have given you the responsibility to evaluate the project. The project requires an initial investment of $90,000 in new machinery and is estimated to generate sales revenue of $120,000 per year for three years. Manufacturing costs are estimayed to be at 60 percent of revenues. The machinery will be depreciated straight line to zero-book value over three years. The project also requires $10,000 of net working capital at the beginning which will be recovered when the project ends. The corporate tax rate is 21 percent and required rate of return is 12 percent. Assume that the asset can sell for $10,000 at the end of the project. Calculate the NPV of the project.
Multiple Choice
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