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Considering manufacturing a new model of paddleboard. This project would require an investment of $315,000 plus an additional $32,000 in working capital. The equipment is
Considering manufacturing a new model of paddleboard. This project would require an investment of $315,000 plus an additional $32,000 in working capital. The equipment is in the 20% CCA rate class, and BG has a tax rate of 25%. BG thinks they can sell 200 boards a year for 5 years, after which the equipment will have a residual value equal to its undepreciated capital cost and will be sold for that amount. The working capital will be recovered. The boards will sell for $1,800. Fixed yearly manufacturing costs are $90,000, and variable costs are $600 per board. BG's cost of capital is 12%. BG uses the accelerated investment incentive, so CCA in Year 1 is 1.5 times the prescribed rate. Calculate the yearly cash flow and the NPV of the project. Should they go ahead with the project?
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To calculate the yearly cash flow and the NPV of the project we need to consider the following components revenue expenses tax depreciation working ca...Get Instant Access to Expert-Tailored Solutions
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