Hawkeye Innovations is considering developing a new type of mouse trap. They have made the following estimates regarding the development of the new product:

• The life of the project is 7 years
• The project will require additional equipment that will cost $21,000. None of the equipment will have any salvage value.
• Sales are expected to be 10,000 units per year at $4.50 per unit
• Variable costs are expected to be $2.60 per unit
• Fixed costs are expected to be $12,000 per year
• The annual Depreciation expense would be $3,000
• Additional Net Working Capital will be needed in Year 0 in the amount of $8,000. 60% of this will be recovered in Year 7
• The companys tax rate is 34%
• The Required Rate of Return on the project is 10%

What is the projects Net Present Value?

Question 39 options:

	$8,921.04
	$921.04
	$3,328.22
	$3,164.68