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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
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 also be constant, but variable costs should rise with inflation. The project should last for 3 years, it will be depreciated on a straight-line basis, and there will be no salvage value. No change in net operating working capital would be required. 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 not round the intermediate calculations and round the final answer to the nearest whole number. WACC 10.0% Net investment cost (depreciable basis) $200,000 Units sold 56,000 Average price per unit, Year 1 $25.00 Fixed op. cost excl. depr. (constant) $150.000 Variable op. cost/unit, Year 1 $20.20 Annual depreciation rate 33.333% Expected inflation rate per year 5.00% Tax rate 40.0% O a. $68,303 O b. $47,624 O c. $65,170 O d. $62,663 e. $76,449
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