TexMex Food Company Is Considering a New Salsa Whose Data

Multiple Choice

TexMex Food Company 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 TexMex 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.
? $$\begin{array} { l r } \text { WACC } & 10.0 \% \\\text { Pre-tax cash flow reduction for other products (cannibalization) } & - \$ 5,000 \\\text { Investment cost (depreciable basis) } & \$ 80,000 \\\text { Straight-line depr. rate } & 33.333 \% \\\text { Annual sales revenues } & \$ 66,000 \\\text { Annual operating costs (excl. depr.) } & - \$ 25,000 \\\text { Tax rate } & 35.0 \%\end{array}$$
?

A) 01,529
B) 01,094
C) 01,403
D) 01,347
E) 01,684