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please noting that it is fix depreciation A AA Incorporation, projects unit sales for new cquipment as follows: Production of items will require $1,500,000 in
please noting that it is fix depreciation
A AA Incorporation, projects unit sales for new cquipment as follows: Production of items will require $1,500,000 in net working capital to start, and additional net working capital investments each year equal to 15% of the projected sales increase for the following year. - Total fixed costs are $1,450,000 per year, -Variable production costs are $230 per unit, - Price per unit is fixed at $355. - The equipment needed to begin production has an installed cost of $24,000,000. - This equipment is considered industrial machinery; thus, depreciated straight line over 5 years. - In five years, this equipment can be sold for about 20% of its acquisition cost. - AAA is in the 35% marginal tax bracket and has a required return on all its projects of 18%. Based on these estimates, what's the NPV? (Hint: you have to calculate: -the net income, the OCF, the changes in NWC (initial, increase, recovery). the capital spending. the cash flows. -then NPV Step by Step Solution
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