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M&M Corporation intends to acquire the equipment needed for a new product at a cost of $ 2 0 0 , 0 0 0 .

M&M Corporation intends to acquire the equipment needed for a new product at a cost of $200,000. The shipping and installation of the equipment is expected to cost an additional $50,000. The company is able to borrow the funds needed at a rate of 12% to finance the acquisition, shipping, and installation of the equipment. The equipment will be depreciated for the four years at the following rates 33%,45%,15%, and 7%, and is expected to have a residual value of $35,000 at the end of the four years.
This is a limited production line that is expected to run for only four years. During that time, the line is expected to sell 1,300 units per year at an operating cost (not including depreciation) of $95 per unit. The product is expected to sell at a per unit price of $170. NWC at any given time is expected to be 13% of the projected sales of the following year. The company enjoys a 40% tax rate and a cost of capital of 10%.
Inflation is projected at 2.5%.
What is the Net Present Value of this project?

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