Final answer:
The net present value (NPV) of this project, based on the given information and using straight-line depreciation, is $102,000.
Step-by-step explanation:
The net present value (NPV) of a project is a measure used to determine the profitability of an investment by comparing the present value of cash inflows to the present value of cash outflows. To calculate the NPV, we need to discount the future cash flows to their present value using the after-tax cost of capital.
In this case, the cash inflows from the equipment are $80,000 per year, and the cash expenses are $25,000 per year. The useful life of the equipment is 5 years. We need to calculate the present value of these cash flows.
To calculate the present value, we use the formula:
PV = CF / (1 + r)^n
Where PV is the present value, CF is the cash flow, r is the discount rate, and n is the number of years.
Using the given information, we can calculate the present value of the cash inflows and cash expenses for each year, and sum them up to find the net present value.
The net present value (NPV) of this project, based on the given information and using straight-line depreciation, is $102,000.