Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Chec The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $30. Year

image text in transcribed
Chec The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $30. Year 1 2 3 4 Thereafter Unit Sales 41,000 44,000 18,000 11,000 0 It is expected that net working capital will amount to 10% of sales in the following year. For example, the store will need an initial (Year O) investment in working capital of 10 x 41,000 * $40 = $164,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $219,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firm's tax rate is 21%. What is the net present value of the project? The discount rate is 15%. Use the MACRS depreciation schedule. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Net present value

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Accounting What the Numbers Mean

Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,

9th Edition

978-0-07-76261, 0-07-762611-7, 9780078025297, 978-0073527062

Students also viewed these Finance questions