Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Aunt Sally s Sauces Inc., is considering expansion into a new line of all - natural, cholesterol - free, sodium - free, fat - free,

Aunt Sallys Sauces Inc., is considering expansion into a new line of all-natural, cholesterol-free, sodium-free, fat-free, low-calorie tomato sauces. Sally has paid $3,000 for a marketing study which indicates that the new product line would have sales of $890,000 per year for the next six years. Manufacturing plant and equipment would cost $600,000 and will be depreciated using the following annual depreciation rates: 0.2,0.32,0.1920,0.1152,0.1152,0.0576. The fixed assets will have no market value at the end of six years. Annual fixed costs are projected at $80,000 and variable costs are projected at 30% of sales. Net operating working capital requirements are $75,000 for the six-year life of the project; the outlay for working capital will be recovered at the end of six years. Aunt Sallys tax rate is 25% and the firm requires a 5% return. The NPV of this project is $___________________.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Multinational Finance

Authors: Kirt C. Butler

3rd Edition

0324177453, 978-0324177459

More Books

Students also viewed these Finance questions