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The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $45. The unit cost of the giftware is $30. Year Unit
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $45. The unit cost of the giftware is $30. Year Unit Sales 42,000 48,000 19,000 9,000 mt Thereafter It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (Year O) investment in working capital of 20 x 42,000 $45 = $378,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $220,000. This investment will be depreciated straight-line over 3 years. After 4 years, the equipment will have an economic and book value of zero. The firm's tax rate is 30%. The discount rate is 12%. a. What is the net present value of the project? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Net present value D b. By how much does NPV increase if the firm takes immediate 100% bonus depreciation? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) Increase in NPV
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