Question
A new project involves the purchase of a $9000 food processing machine. The machine would be depreciated on a straight-line basis over its 3-year useful
A new project involves the purchase of a $9000 food processing machine. The machine would be depreciated on a straight-line basis over its 3-year useful life to a book value of $351. At the end of the life of the project (at the year 3 point), the machine will be sold for an estimated $618. The project will cause an increase in Sales of $5,337 in each of years 1 through 3. It is also expected to enhance efficiencies and reduce operating expenses by $1,070 in each of years 1 through 3. The project will require an increase in Accounts Receivable of $790 and an increase in Accounts Payable of $1,356 upfront. The project's impact on these accounts is expected to disappear at project end (in year 3). The firm's marginal tax rate is 40%, and its WACC is 12%. The NPV of this project is $_________. Round your final answer to 2 decimal places (example: if your answer is 12.3456, you should enter 12.35).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started