Question
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25. YearUnit Sales122,000230,000314,00045,000Thereafter0
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25.
YearUnit Sales122,000230,000314,00045,000Thereafter0It 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 0) investment in working capital of 0.20 22,000 $40 = $176,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $200,000. This investment will be depreciated straight-line over 3 years. The firms tax rate is 30%. The discount rate is 20%.
What is the net present value of the project?
Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.
By how much does NPV increase if the firm takes immediate 100% bonus depreciation?
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