Greetings,

I've been working on this problem for awhile and am really struggling. My calculations aren't correct. Any help is greatly appreciated. Thank you for your time!

A company manufactures fine furniture. The company is deciding whether to introduce a new mahogany dining room table set. The set will sell for $6,200, including a set of eight chairs. The company feels that sales will be 1,900, 2,050, 2,600, 2,450, and 2,200 sets per year for the next five years, respectively. Variable costs will amount to 40 percent of sales, and fixed costs are $1.8 million per year. The new dining room table sets will require inventory amounting to 6 percent of sales, produced and stockpiled in the year prior to sales. It is believed that the addition of the new table will cause a loss of sales of 275 dining room table sets per year of the oak tables the company produces. These tables sell for $3,500 and have variable costs of 35 percent of sales. The inventory for this oak table is also 6 percent of sales. The company believes that sales of the oak table will be discontinued after three years. The company currently has excess production capacity. If the company buys the necessary equipment today, it will cost $19 million. However, the excess production capacity means the company can produce the new table without buying the new equipment. The company controller has said that the current excess capacity will end in two years with current production. This means that if the company uses the current excess capacity for the new table, it will be forced to spend the $19 million in two years to accommodate the increased sales of its current products. In five years, the new equipment will have a market value of $3.2 million if purchased today, and $7.9 million if purchased in two years. The equipment is depreciated on a seven-year MACRS schedule. The company has a tax rate of 40 percent, and the required return for the project is 8 percent.

Finding a solution in dollars, not millions of dollars, not rounding intermediate calculations, and rounding an answer to two decimal places, (e.g. 7,492,304.23)...

What is the NPV of the new table?

MACRS Schedule

Recovery Period Class

Year 3 Years 5 Years 7 Years 10 Years 15 Years 20 Years

1 .3333 .2000 .1429 .1000 .0500 .03750

2 .4445 .3200 .2449 .1800 .0950 .07219

3 .1481 .1920 .1749 .1440 .0855 .06677

4 .0741 .1152 .1249 .1152 .0770 .06177

5 .1152 .0893 .0922 .0693 .05713

6 .0576 .0892 .0737 .0623 .05285

7 .0893 .0655 .0590 .04888

8 .0446 .0655 .0590 .04522

9 .0656 .0591 .04462

10 .0655 .0590 .04461

11 .0328 .0591 .04462

12 .0590 .04461

13 .0591 .04462

14 .0590 .04461

15 .0591 .04462

16 .0295 .04461

17 .04462

18 .04461

19 .04462

20 .04461

21 .02231