Question
DSSS Corporation DSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $125,000. The cost of shipping and
DSSS Corporation DSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $125,000. The cost of shipping and installation is an additional $10,000. The asset will fall into the 3-year MACRS class. The year 1- 4 MACRS percentages are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. Sales are expected to be $225,000 per year. Cost of goods sold will be 60% of sales. The project will require an increase in net working capital of $10,000. At the end of three years, DSSS plans on ending the project and selling the manufacturing equipment for $25,000. The marginal tax rate is 40% and DSSS Corporations appropriate discount rate is 15%.
What is the operating cash flow for year 1?
What is the NPV of the project?
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