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Fidsound has developed a new high-performance videotape. The manager's expectations appear below. Annual volume 60,000 units for 4 yrs Selling price $9 Unit variable cost
Fidsound has developed a new high-performance videotape. The manager's expectations appear below.
Annual volume 60,000 units for 4 yrs
Selling price $9
Unit variable cost $4
Cost of required machinery $300,000
Annual cash fixed costs $140,000
Increase in receivables $80,000
Increase in inventory $20,000
The increase in working capital will be returned in full at the end of the four years. The tax rate is 40% and cost of capital is 12%.
Required:
Determine the NPV of the investment.
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