Question
Atlantic Manufacturing is considering a new investment project that will last for four years. The delivered and installed cost of the machine needed for the
Atlantic Manufacturing is considering a new investment project that will last for four years. The delivered and installed cost of the machine needed for the project is $22,814 and it will be depreciated according to the three-year MACRS schedule. The project also requires an initial increase in net working capital of $291. Financial projections for sales and costs are in the table below. In addition, since sales are expected to fluctuate, NWC requirements will also fluctuate. The end-of-year NWC requirements are included below (hint: these NWC capital requirements DO NOT represent the change in NWC for the period). The $0 requirement for NWC at the end of year 4 means that all NWC is recovered by the end of the project. The corporate tax rate is 35% and the required return on the project is 12%.
Year | 1 | 2 | 3 | 4 |
Sales | $11,758 | $12,922 | $13,819 | $10,473 |
Costs | 2,239 | 2,694 | 3,235 | 1,213 |
NWC Requirements | 338 | 353 | 249 | 0 |
What is the projects NPV?
Thumbs up for a good response. Thank you in advance.
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