Your firm manufactures a generic low-cost product. To be more competitive, you are considering expanding your...
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Your firm manufactures a generic low-cost product. To be more competitive, you are considering expanding your product line with a new premium version of your product. Below are the details. o Cost of new equipment: $90,000 o Installation cost of equipment: $40,000 o Life of equipment: 5 years, Straight line depreciation o Expected sales: $170,000 per year o Expected reduction in sales of generic product customers shift to the new line: $10,000 per year o Raw material cost: $90,000 per year o New worker salary: $20,000 per year o Required Net working capital over the life of the project: $20,000 o Expected Salvage value of equipment at the end of 5 year: $30,000 o Tax rate: 35%. Assuming a WACC of 15%, what is this project's NPV? Your firm manufactures a generic low-cost product. To be more competitive, you are considering expanding your product line with a new premium version of your product. Below are the details. o Cost of new equipment: $90,000 o Installation cost of equipment: $40,000 o Life of equipment: 5 years, Straight line depreciation o Expected sales: $170,000 per year o Expected reduction in sales of generic product customers shift to the new line: $10,000 per year o Raw material cost: $90,000 per year o New worker salary: $20,000 per year o Required Net working capital over the life of the project: $20,000 o Expected Salvage value of equipment at the end of 5 year: $30,000 o Tax rate: 35%. Assuming a WACC of 15%, what is this project's NPV?
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Calculating the Net Present Value NPV of the Project 1 Identify cash flows Year 0 Initial investment ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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