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Cisco is considering the development of a wireless home networking appliance, called HomeNet. The company expects to sell 3 4 0 0 0 0 units

Cisco is considering the development of a wireless home networking appliance, called HomeNet. The company expects to sell 340000 units per year over the project's life at an expected wholesale price of 160. Actual production will be outsourced at a cost of 96 per unit. Additionally, the company will spend $22000 in interest expense each year towards financing the project. In year 1, the firm must increase its accounts receivable by $891000, which will return to regular levels at the end of the project. The company spent $256000 last year on software to develop the router. $117.7 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 6.2% 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 15.9%.What is the NPV of the project?

 
  

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