Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Cisco is considering the development of a wireless home networking appliance, called HomeNet. The company expects to sell 410000 units per year over the
Cisco is considering the development of a wireless home networking appliance, called HomeNet. The company expects to sell 410000 units per year over the project's life at an expected wholesale price of 170. Actual production will be outsourced at a cost of 107 per unit. Additionally, the company will spend $29000 in interest expense each year towards financing the project. In year 1, the firm must increase its accounts receivable by $812000, which will return to regular levels at the end of the project. The company spent $237000 last year on software to develop the router. $92.3 million of new equipment will be purchased and then depreciated using the straight-line method over a 10-year life. They expect the market value of the equipment to depreciate at 3,8% per year. The project is expected to end in year 6. The current tax rate is 21%. Use this rate for both income tax rate and the capital gains rate. The WACC for the company is 12.1%. What is the NPV of the project? $32,651.527.29 $31.927,269.60 $32.021.195.77 $31.612.008.27
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