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QUESTION 1 7 1 5 points Firm X builds a low - cost product. Due to overseas competition, the firm is going to expand its

QUESTION 17
15 points
Firm X builds a low-cost product. Due to overseas competition, the firm is going to expand its line of products and introduce a new premium line. Below are the details of the investment.
Cost of new equipment: $90,000
Installation cost of equipment: $40,000
Life of equipment: 5 years, Straight line depreciation
Expected sales: $170,000 per year
Expected reduction in sales generic product as customers shift to the new line: $10,000 per year
Raw material cost: $90,000 per year
New worker salary: $20,000 per year
Required Net working capital over the life of the project: $20,000
Expected Salvage value of equipment at the end of 5 year: $30,000
Tax rate: 35%.
Assuming a WACC of 13%, what is this project's NPV?
a.-5,068
b.6,610
c.12,703
d.17,756
e.25,294
QUESTION 18
10 points
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