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Powaline Products, Inc. is considering introducing a new elliptical trainer, the NOVID-19, for the home market. The CFO of Powaline has assembled the following financial

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Powaline Products, Inc. is considering introducing a new elliptical trainer, the NOVID-19, for the home market. The CFO of Powaline has assembled the following financial information about this new product Last month, Powaline Products hired a marketing company to conduct a survey of its current users to determine the potential market demand for a new product. Powaline received the marketing report last week along with a bill for $250,000 asking for payment in 10 days Powaline Products will need to spend $14,300,000 today to build a new factory to manufacture and assemble the NOVID-19. This investment will be depreciated on a straight-line basis to a $2,000,000 salvage value over 10 years Powaline Products intends to sell the factory in 10 years for $2,000,000 Production of the NOVID-19 will require an immediate increase in net working capital of $2,500,000 This investment will be fully recovered at the end of the life of the project Revenue from sales of the NOVID-19 are expected to be $14,000,000 per year for each of the next 10 years The NOVID-19 is expected to decrease sales of other Powaline Products elliptical trainers by $1,500,000 per year for each of the next 10 years. Incremental direct costs to the entire company associated with producing and selling the NOVID-19 are estimated to be $7,500,000 per year for each of the next 10 years Powaline Products marginal tax rate is 40% Powaline Products weighted average cost of capital (WACC) is 12% Based on the information provided above what is the initial investment (e. CFO) for this project

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