Can anyone shed some light on this NPV question?
An analyst gathered the following data about a project:
Costs are $8000 plus $2000 in shipping and installation
For the next five years the project will annually generate $5000.00 in sales and $2000 in costs, not including depreciation.
The project is being depreciated on a straight line basis over five years with no salvage value.
The company’s tax rare is 40% and the WACC is 10%.
The projects NPV is closest to:
A.) $144
B.) $144
C.) $279
D.) $1244作者: ShooterMcCFA 时间: 2013-4-8 13:23
sorry copying the excel sheet didnt work.
Anyways, its like this.
1. Calculate profit,
2. Calculate Tax
3. Deduct tax from profit to get profit after tax
4. add back depreciation to profit after tax to find net cash flows
5. discount net cash flows作者: dmrktrading 时间: 2013-4-8 13:24
I thought tax implications were ignored for NPV calcuations, no?作者: willsucceed 时间: 2013-4-8 13:24
I think cash flows are analyzed on an aftertax.作者: homie 时间: 2013-4-8 13:25
NPV is calculated on after tax basis..so chelseace is correct in his calcuation
