CFA Level I sample question

CFA Level I Capital Investments and Capital Allocation question

Corporate Issuers / Capital Investments and Capital Allocation

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Capital Investments and Capital Allocation sample question

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Corporate Issuers

Capital Investments and Capital Allocation

A project requires equipment costing 400,000 and an immediate net working capital investment of 50,000. It will generate annual after-tax operating cash flow of 140,000 for four years. At the end of year 4, equipment with zero book value will be sold for 40,000 and NWC will be recovered. The tax rate is 25% and the required return is 10%. The NPV is closest to:

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