November 29, 2015

Homework Help: Finance ( Need help )

Posted by Alexis on Thursday, July 30, 2009 at 8:05pm.

TexMex Food Company is considering a new salsa whose data are shown below. The equipment to be used would be depreciated by the straight-line method over its 3-year life and would have a zero salvage value, and no new working capital would be required. Revenues and other operating costs are expected to be constant over the project's 3-year life. However, this project would compete with other TexMex products and would reduce their pre-tax annual cash flows. What is the project's NPV? (Hint: Cash flows are constant in Years 1-3.)

Pre-tax cash flow reduction for other products (cannibalization)
Investment cost (depreciable basis)
Straight-line depr. rate
Sales revenues, each year for 3 years
Annual operating costs (excl. depr.)
Tax rate

The answer i chose was - 2,612 but i have a feeling it was wrong and if it rights it was by chance.It doesn't feel like I got it the right way . Need help

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