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Project Analysis and Inflation Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $1.2
Project Analysis and Inflation Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $1.2 million, and its economic life is five years. The machine will be fully depreciated by the straight- line method. The machine will produce 25,000 keyboards each year. The price of each keyboard will be $47 in the first year and will increase by 3 percent per year. The production cost per keyboard will be $17 in the first year and will increase by 4 percent per year. The project will have an annual fixed cost of $235,000 and require an immedi- ate investment of $200,000 in net working capital. The corporate tax rate for the com- pany is 21 percent. If the appropriate discount rate is 11 percent, what is the NPV of the investment
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