Question
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $20. Year Unit
The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $20.
Year | Unit Sales |
1 | 34,000 |
2 | 42,000 |
3 | 16,000 |
4 | 10,000 |
Thereafter | 0 |
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 0) investment in working capital of .20 34,000 $40 = $272,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $212,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firms tax rate is 21%. What is the net present value of the project? The discount rate is 20%. Use the MACRS depreciation schedule. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started