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Project NPV Calculation Due to the growing popularity of surf-themed printed casual wear, two recent MBA graduates decided to expand this casual concept of surfing
Project NPV Calculation Due to the growing popularity of surf-themed printed casual wear, two recent MBA graduates decided to expand this casual concept of surfing to encompass the surf lifestyle at home. . With limited capital they decided to focus on table and floor lamps with shades printed with surfing landscapes to adorn the houses. They think that unit sales of these lamps would be 6,000 units in the first year, growing at 8% per year for the next five years. Production of these lamps will require $28,000 in net working capital to start. Total fixed costs are $80,000 per year, variable production costs are $20 per unit, and the units will be priced at $48 each. The equipment needed to start production costs $145,000. The equipment will be depreciated using the straight-line depreciation method over a five-year life and is not expected to have salvage value. The effective tax rate is 34% and the required rate of return is 25%. What is the NPV of this project?
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