Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pappy s Potato has come up with a new product, the Potato Pet. Pappy s paid $ 8 0 , 0 0 0 for a

Pappys Potato has come up with a new product, the Potato Pet. Pappys paid $80,000 for a marketing survey to determine the viability of the product. It is estimated that Potato Pet will generate sales of $610,000 per year. The fixed costs associated with this project will be $178,000 per year and variable costs will amount to 30% of sales. The equipment will cost $600,000 and be depreciated in a straight-line manner for the four years of the project life. It can be sold for $20,000 at the end of the project. The initial net operating working capital is $40,000 and will increase by $10,000 each year until the end of the project. Pappys is paying a 25% tax rate and has a required rate of return of 8%.The NPV of this project is $__________________.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Understanding Healthcare Financial Management

Authors: Louis C. Gapenski, George H. Pink

6th Edition

1567933629, 9781567933628

More Books

Students also viewed these Finance questions

Question

How does a separate account differ from a mutual fund?

Answered: 1 week ago

Question

14.4 Analyze in detail three basic causes of accidents.

Answered: 1 week ago