Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Desai Industries is analyzing an average-risk project, and the following data have been developed. Unit sales will be constant, but the sales price should
Desai Industries is analyzing an average-risk project, and the following data have been developed. Unit sales will be constant, but the sales price should increase with inflation. Fixed costs will lso be constant, but variable costs should rise with inflation. The project should last for 3 years. Under the new tax law, the equipment used in the project is eligible for 100% bonus lepreciation, so it will be fully depreciated at t-o. At the end of the project's life, the equipment would have no salvage value. No change in net operating working capital (NOWC) would be equired for the project. This is just one of many projects for the firm, so any losses on this project can be used to offset gains on other firm projects. What is the project's expected NPV? Do ot round the intermediate calculations and round the final answer to the nearest whole number. WACC Equpiment cost Units sold 10.0% $200,000 45,000 Average price per unit, Year 1 $28.00 Fixed op. costs (constant) $150,000 Variable op. cost/unit, Year 1 $22.20 Expected annual inflation rate 5.00% 25.0% Tax rate O a. $30,194 O b. $80,194 O c. $102,920 O d. $71,641 O e. $121,641
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