Question
ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $795,000.00 work
ABC Corporation has hired you to evaluate a new FOUR year project for the firm. The project will require the purchase of a $795,000.00 work cell. Further, it will cost the firm $50,400.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $70,500.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated, but has a market value of $7,100.00. Finally, the firm will invest $11,900.00 in net working capital to ensure the project has sufficient resources to be successful. The project will generate annual sales of $918,000.00 with expenses estimated at 40.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 39.00%. The work cell is estimated to have a market value of $472,000.00 at the end of the fourth year. The firm expects to reclaim 84.00% of the final NWC position. The cost of capital is 10.00%.
What is the NPV the project if we end the project after 4 years?
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