Lakeside Winery is considering expanding its wine-making operations. | Cheap Nursing Papers

Lakeside Winery is considering expanding its wine-making operations.

Lakeside Winery is considering expanding its wine-making operations. The expansion will require new equipment costing $649,000 that would be depreciated on a straight-line basis to a zero balance over the four-year life of the project. The estimated salvage has a 30% probability to be $200,000, a 50% probability to be $185,000 and a 20% probability to be $172,500. The project requires $38,000 initially for net working capital, all of which will be recouped at the end of the project. The projected operating cash flow is $198,500 a year. What is the net present value of this project if the relevant discount rate is 14% and the tax rate is 35%?

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