Question
Question #3: Given the recent problems with air population in major cities, you decide to start selling a product called Perri-Air, which is canned air.
Question #3: Given the recent problems with air population in major cities, you decide to start selling a product called "Perri-Air," which is canned air. You already spent $25,000 developing the can design and marketing materials. If you sell the canned air, you plan on selling each can for $2 and believe you can sell 1 million cans per year. The variable cost per can is $1.75. The fixed costs is $175,000 per year. There is no fixed investment needed as you plan on outsourcing production. However, you need to make an investment in working capital of $300,000 today, which will remain constant over the length of the project. You will fully recover the working capital investment at the end of the project. If you can sell the canned air for 5 years, depreciate all new initial fixed investments using straight-line depreciate to zero, have a 30% tax rate, and your cost of capital is 8%, what is the NPV of the project?
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