Stortz Corporation Is Considering a Capital Budgeting Project That Would

Essay

Stortz Corporation is considering a capital budgeting project that would require investing $120,000 in equipment with a 4 year useful life and zero salvage value. Annual incremental sales would be $290,000 and annual incremental cash operating expenses would be $210,000. A one-time expense of $30,000 for renovations would be required in year 3. The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting. The company's tax rate is 35% and the after-tax discount rate is 14%.
Required:
Determine the net present value of the project. Show your work!