Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Dickinson Brothers Inc. is considering investing in a machine for producing computer keyboards. The price of the Machine will be $1,300,000 and its economic life

Dickinson Brothers Inc. is considering investing in a machine for producing computer keyboards. The price of the Machine will be $1,300,000 and its economic life 5 years. The machine will be fully depreciated by straight-line method. The machine will produce 25,000 units of keyboards each year. The price of the keyboard will be $47 in the first year, and it will increase by 4% per year. The production cost per unit of the keyboard will be $17 in the first year, and it will increase at 5% per year. The project will have an annual fixed cost of $245,000 and require an immediate investment of $210,000 in net working capital. The corporate tax rate is for the company 22%. The appropriate discount rate is 9%.

What is the NPV of the investment?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Institutions Management

Authors: Anthony Saunders

1st Edition

0256110565, 9780256110562

More Books

Students also viewed these Finance questions

Question

Describe how a capital budget is constructed.

Answered: 1 week ago

Question

3. Define the roles individuals play in a group

Answered: 1 week ago