Easy Payment Loan Company is thinking of opening a new office,and the key data are shown below.Easy Payment owns the building,free and clear,and it would sell it for $100,000 after taxes if the company decides not to open the new office.The equipment that would be used would be depreciated by the straight-line method over the project's 3-year life,and would have a zero salvage value.An extra $5,000 of new working capital would be required to get this project running.Revenues and cash operating costs would be constant over the project's 3-year life.What is the project's NPV? (Hint: Cash flows are constant in Years 1-3 and the increased working capital will be recovered when this project ends.A simplified CCA is for mathematical convenience.)

\begin{array}{lr}\text { WACC } & 10.0 \% \\\text { Net equipment capital cost } & \$ 65,000 \\\text { Annul CCA deduction for equipment } & \$ 21,665 \\\text { Sales revenues, each year } & \$ 150,000 \\\text { Cash operating costs, each year } & \$ 25,000 \\\text { Tax rate } & 3.5 \%\end{array}

10.0%
A)$47,940
B)$50,464
C)$54,672
D)$55,915

Sensitivity Analysis Measures the Stand-Alone Risk of a Project by Showing

True/False

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