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RocketOwl, Inc. is considering a new product to bring to market. They estimate the product would have a viable market for five years. If they
RocketOwl, Inc. is considering a new product to bring to market. They estimate the product would have a viable market for five years. If they wish to do the project they will need to purchase equipment with a price of $ The firm will use straightline depreciation to a value of $ and assume the equipment will have a pretax salvage value of $ They estimate revenue and costs for the project as presented in the table:
Operating Year Revenue Costs
$ $
$ $
$ $
$ $
$ $
RocketOwl, Inc. expects the project will need initial inventory for the project of $ and this amount will stay constant throughout the project. They also expect in the investment year the project will generate accounts receivable of $ and accounts payable of $ They also assume that the project will generate accounts payable each year equal to of annual sales and accounts payable equal to of annual costs. The firm's average tax rate is If the firm's WACC is equal to what is the NPV of the project?
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