Thomson Media is considering some new equipment whose data are shown below. The equipment has a 3 year tax life and would be fully depreciated by the straight line method over 3 years but it would have a positve pre-tax salvage value at the end of year 3, when the project would be closed down. Also, some new working capital would be required, but it would be recovered at the end of the project's life. Revenues and other operating costs are expected to be constant over the project's 3 year life. What is the project's NPV?

WACC = 10%
Net investment in fixed assets (depreciable basis) = $70,000
Required new working capital = $10,000
Straight line depr rate = 33.333%
Sales revenues each year = $75,000
Operating costs (excl depr) each year = $30,000
Expected pretax salvage value = $5,000
Tax rate = 35%

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To calculate the project's NPV, we need to calculate the cash flows for each year and discount them back to the present value using the weighted average cost of capital (WACC).

Step 1: Calculate the annual depreciation expense:
Depreciation expense = Net investment in fixed assets * Depreciation rate
Depreciation expense = $70,000 * 33.333% = $23,333.33 per year

Step 2: Calculate the annual operating cash flows:
Operating cash flows = Sales revenues - Operating costs (excluding depreciation) - Depreciation expense
Operating cash flows = $75,000 - $30,000 - $23,333.33
Operating cash flows = $21,666.67 per year

Step 3: Calculate the salvage value after tax:
Salvage value after tax = Pretax salvage value * (1 - Tax rate)
Salvage value after tax = $5,000 * (1 - 35%)
Salvage value after tax = $5,000 * 0.65 = $3,250

Step 4: Calculate the annual after-tax cash flows:
Year 1: Operating cash flow = $21,666.67
Year 2: Operating cash flow = $21,666.67
Year 3: Operating cash flow + Salvage value after tax = $21,666.67 + $3,250 = $24,916.67

Step 5: Calculate the present value of each cash flow:
PV = Cash flow / (1 + WACC)^n

Year 1: PV = $21,666.67 / (1 + 10%)^1 = $19,696.07
Year 2: PV = $21,666.67 / (1 + 10%)^2 = $16,996.99
Year 3: PV = $24,916.67 / (1 + 10%)^3 = $18,195.06

Step 6: Calculate the total present value:
Total present value = PV of Year 1 + PV of Year 2 + PV of Year 3
Total present value = $19,696.07 + $16,996.99 + $18,195.06 = $55,888.12

Step 7: Calculate the net present value (NPV):
NPV = Total present value - Initial investment
NPV = $55,888.12 - ($70,000 + $10,000) = $-24,111.88

Therefore, the project's NPV is -$24,111.88.

To calculate the project's NPV (Net Present Value), we need to estimate the cash flows associated with the project and then discount them to their present value using the company's weighted average cost of capital (WACC).

Here's how you can calculate the NPV step by step:

1. Calculate the annual cash flows:
Year 0: Initial investment (Net investment in fixed assets + Required new working capital) = $70,000 + $10,000 = $80,000 (negative cash flow)
Year 1-3: Net cash flow from operations = Revenues - Operating costs (excluding depreciation) - Depreciation expense - Tax expense
= $75,000 - $30,000 - ($70,000 * 33.333%) - (Tax rate * (Revenues - Operating costs (excluding depreciation) - Depreciation expense))

In this case, tax expense can be calculated as (Tax rate * (Revenues - Operating costs (excluding depreciation) - Depreciation expense))

Year 3: Remember to add the pretax salvage value as an inflow.

2. Determine the present value of each cash flow using the WACC:
The WACC is given as 10%, so you will discount the cash flows using this rate.

3. Sum up the present values of the cash flows:
Add up the present values of each cash flow (negative and positive) to calculate the overall NPV.

The resulting NPV will determine if the project is expected to generate positive or negative value for the company. A positive NPV indicates that the project is expected to generate more value than the initial investment and is therefore desirable.

Please note that the provided information does not include the WACC component, which is crucial for calculating the NPV. Make sure to include the WACC in your calculations to obtain an accurate result.