WorldTrans 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,...



WorldTrans 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 change in net operating 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 WorldTrans 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.) Do not round the intermediate calculations and round the final answer to the nearest whole number.

































WACC

10.0%


Pre-tax cash flow reduction for other products (cannibalization)

-$5,000


Investment cost (depreciable basis)

$80,000


Straight-line depr. rate

33.333%


Annual sales revenues

$66,000


Annual operating costs (excl. depr.)

-$25,000


Tax rate

35.0%





Group of answer choices

$1,571



$1,136



$1,403



$1,207



$1,613




Jun 08, 2022
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