Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cases In Healthcare Finance

Authors: Louis C. Gapenski

3rd Edition

1567932444, 9781567932447

More Books

Students also viewed these Finance questions