Ned Thompson Labs performs tests on super alloys, titanium, aluminum, and most metals. Tests on…

Ned Thompson Labs performs tests on super alloys, titanium, aluminum, and most metals. Tests on….

Ned Thompson Labs performs tests on super alloys, titanium, aluminum, and most metals. Tests on metal composites that rely upon scanning electron microscope results can be subcontracted, or the labs can purchase new equipment. 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 positive pre-tax salvage value at the end of Year 3, when the project would be closed down. Also, additional net operating 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. IRR, MIRR and Payback Period?

WACC 10.0%

Net investment in foed assets (depreciable basis) $70,000
Required net operating working capital $10,000
Straight-line depreciation rate 33.333%
Annual sales revenues $75.000
Annual operating costs (excl. depreciation) $30,000
Expected pre-tax salvage value $5.000
Tax rate 35.0%

Ned Thompson Labs performs tests on super alloys, titanium, aluminum, and most metals. Tests on…