Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company will sell Gizmos to consumers at a price of $111 per unit. The variable cost to produce Gizmos is $43 per unit. The

image text in transcribed

A company will sell Gizmos to consumers at a price of $111 per unit. The variable cost to produce Gizmos is $43 per unit. The company expects to sell 19,000 Gizmos to consumers each year. The fixed costs incurred each year will be $170,000. There is an initial investment to produce the goods of $3,900,000 which will be depreciated straight line over the 8 year life of the investment to a salvage value of $0. The opportunity cost of capital is 6% and the tax rate is 30% What is operating cash flow each year? 931650 Correct response: 931,6501 Click "Verify" to proceed to the next part of the question. > Using the an annual operating cash flow of $931,650, what is the net present value of this investment? 1885354 Correct response: 1,885,354.4+10 Should the company accept or reject this project? Reject Accept Correct response: Accept Click "Verify" to proceed to the next part of the question. What is the net present value of the project if inventories must be increased at the start of the project (year 0) by $1,000,000 and will be recovered at the end (year 8), given that the NPV of the project ignoring changes in net working capital is $1,885,354.4? Number Click "Verify" to proceed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Debt Resisters Operations Manual

Authors: Strike Debt Strike Debt

1st Edition

1604866799, 978-1604866797

More Books

Students also viewed these Finance questions