FDC has decided to offer Unicorn Cookies. We paid a non-refundable, $120,000 for a marketing survey to help us understand food trends prior to settling in on Unicorn as the next new cookie option. FDC thinks that the new cookie will generate $300,000 in incremental sales per year. Fixed costs will be $125,000 per year, and variable costs will be approximately 30% of sales (lots of food coloring). The capital investment in the equipment needed to produce the new cookies will cost $200,000 and will be depreciated in a straight-line manner for the 4 years of the cookies life (if you think unicorn will really last that long). Net working capital will not be affected by this project. The firm a marginal tax rate of 40%. The required rate of return on projects with similar risk is 9%.

Cashflow from operations

Total cash flow

Discount rate

Years

Please calculate the Net Income for all 4 years as well as the NPV

What if fixed costs increased by 15%