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Question: We project unit sales for a new household-use lase...

We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year Unit Sales 1 93,000 2 105,000 3 128,000 4 134,000 5 87,000 The new system will be priced to sell at $380 each. The cockroach eradicator project will require $1,800,000 in net working capital to start, and total net working capital will rise to 15 percent of the change in sales. The variable cost per unit is $265, and total fixed costs are $1,200,000 per year. The equipment necessary to begin production will cost a total of $24 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20 percent. In five years, this equipment will actually be worth about 20 percent of its cost. The relevant tax rate is 35 percent, and the required return is 18 percent. Based on these preliminary estimates, what is the NPV of the project?

(use the spreadsheet template below and PVCCATS to answer this question) Hint NPV= CF year+ PVCCATS + discounted flow yr 1 + discounted flow yr 2 + discounted flow yr 5 Sales Variable costs Fixed costs Net Taxes (35% Net t after-tax NWC balance Cash flow = Net profit after-tax + (ANWC) or NWC recovered Salvage value (20% Total cash flow PV(t = 0