A project has an initial requirement of $261,000 for fixed assets and $27,000 for net working capital. The fixed assets will be depreciated to a zero book value over the 4-year life of the project and have an estimated salvage value of $78,000. All of the net working capital will be recouped at the end of the project. The annual operating cash flow is $96,200 and the discount rate is 13 percent. What is the project's net present value if the tax rate is 35 percent?

To calculate the net present value (NPV) of the project, we need to discount the cash flows to their present value and then subtract the initial investment cost.

First, let's calculate the present value of the annual operating cash flows. The annual cash flow is $96,200 for 4 years. To find the present value, we need to discount each cash flow by the discount rate (13%).

PV of annual cash flows = CF1 / (1+r)^1 + CF2 / (1+r)^2 + CF3 / (1+r)^3 + CF4 / (1+r)^4

Where CF1 is the cash flow in year 1, CF2 is the cash flow in year 2, and so on, and r is the discount rate.

PV of annual cash flows = 96200 / (1+0.13)^1 + 96200 / (1+0.13)^2 + 96200 / (1+0.13)^3 + 96200 / (1+0.13)^4

Calculating this gives us the present value of the annual operating cash flows.

Next, we need to consider the salvage value of the fixed assets. The salvage value is $78,000, which we also need to discount to its present value.

PV of salvage value = SV / (1+r)^n

Where SV is the salvage value and n is the number of years.

PV of salvage value = 78000 / (1+0.13)^4

Now, we can calculate the net present value (NPV) by subtracting the initial investment cost from the present value of the cash flows.

NPV = PV of annual cash flows + PV of salvage value - Initial investment cost

Initial investment cost = Cost of fixed assets + Net working capital

Initial investment cost = $261,000 + $27,000

Finally, we can substitute the values into the formula and calculate the net present value (NPV) of the project.

Please insert the tax rate to calculate the NPV.

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