Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $992,000, and its economic life

Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $992,000, and its economic life is five years. The machine will be fully depreciated by the straight-line method. The machine will produce 37,000 keyboards each year. The price of each keyboard will be $35 in the first year and will increase by 5 percent per year. The production cost per keyboard will be $15 in the first year and will increase by 6 percent per year. The project will have an annual fixed cost of $212,000 and require an immediate investment of $42,000 in net working capital. The corporate tax rate for the company is 38 percent. The appropriate discount rate is 10 percent. 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

Step: 3

blur-text-image

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

Risk Sensitive Investment Management

Authors: Mark H A Davis, Sébastien Lleo

1st Edition

9814578037, 978-9814578035

More Books

Students also viewed these Finance questions

Question

Describe your ideal working day.

Answered: 1 week ago