25. Project Evaluation. The following table presents sales forecasts for Golden Gelt Giftware. The unit price is
Question:
25. Project Evaluation. The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25.
It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (year-0) investment in working capital of .20 x 22,000 x $40 = $176,000. Plant and equipment necessary to establish the Giftware business will require an additional investment of $200,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firm's tax rate is 35%. What is the net present value of the project? The discount rate is 20%. (LO4)
Step by Step Answer:
Fundamentals Of Corporate Finance
ISBN: 9780073382302
6th Edition
Authors: Richard A Brealey, Stewart C Myers, Alan J Marcus