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 $23,959 and it will be depreciated according to the three-year MACRS schedule. The project also requires an initial increase in net working capital of $308. 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 | $11,523 | $12,523 | $13,182 | $10,455 |
Costs | 2,159 | 2,631 | 3,017 | 1,234 |
NWC Requirements | 340 | 359 | 219 | 0 |
What is the projects NPV? (Round answer to 2 decimal places. Do not round intermediate calculations).
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