PGH Inc Is Considering a New Seven-Year Expansion Project with an an Initial

Multiple Choice

PGH Inc. is considering a new seven-year expansion project with an initial fixed asset investment of $3.87 million. The fixed asset will be depreciated straight-line to zero over its seven-year tax life, after which time it will be worthless. No bonus depreciation will be taken. The project is estimated to generate $2,103,000 in annual sales, with costs of $1,065,000. The tax rate is 21 percent and the required return is 14.6 percent. What is the net present value of this project?

A) $32,155.56
B) $71,841.16
C) $134,098.28
D) −$52,171.66
E) $95,008.04