Question
Alpha Medical is considering adding new production equipment to make face masks for the next four years. The initial capital investment is expected to be
Alpha Medical is considering adding new production equipment to make face masks for the next four years. The initial capital investment is expected to be $990,000 and the equipment falls in the CCA class that has a CCA rate of 25% for depreciation purposes. The equipment will have a a salvage value of $70,000 in four years. Alpha expected to have sales of $ 1090,000 per year for the next four years. Project costs are 55% of the sales. The project also requires an increase of net working capital by $ 45000 at the start, and this will be recovered at the end of the project. Assume a tax rate of 34 percent. If Alpha Medical requires a 13 percent return, what is the NPV of this project?
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