Question
Please help me do it on excel and show me how to calculate each step on excel Your company has been doing well, reaching $1
Please help me do it on excel and show me how to calculate each step on excel
Your company has been doing well, reaching $1 million in earnings, and is considering launching a new product. Designing the new product has already cost $500,000. The company estimates that it will sell 770,000 units per year for $4.5 per unit and variable non-labor costs will be $1 per unit. Production will end after year 3. New equipment costing $1 million will be required. The equipment will be put into use in year 1 and depreciated to zero using the 7-year MACRS schedule. You plan to sell the equipment for book value at the end of year 3. Your current level of working capital is $350,000. The new product will require the working capital to increase to a level of $500,000 immediately, then to $440,000 in year 1, in year 2 the level will be $370,000, and finally in year 3 the level will return to $350,000. Your tax rate is 21%. The discount rate for this project is 10%. Do the capital budgeting analysis for this project and calculate its NPV
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