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A robotics firm is deciding whether to start the production of a new vacuum-cleaner robot, the Fab1. The necessary manufacturing equipment costs 6,000 and has
A robotics firm is deciding whether to start the production of a new vacuum-cleaner robot, the Fab1. The necessary manufacturing equipment costs 6,000 and has an expected economic life of 6 years. The equipment will be depreciated using the straight-line method over 6 years. At the end of the five years, the equipment can be sold for 1,500. The marketing department provides the following forecast: 4 Year Sales Revenue Costs 1 12,000 8,000 2 14,000 9,000 3 14,000 9,000 14,000 9,000 5 10,000 7,000 Net Working Capital requirements at the end of each year are expected to be 10 % of sales, but in the last year of the project they will be brought to zero. The company pays 40% corporate taxes, and its weighted average cost of capital is 10 %. What is the NPV of the Fabl project
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