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 $ 4 0 . The unit cost of the giftware is

The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $25.
Year Unit Sales
125,800
249,000
333,000
45,000
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\times 25,800\times $40= $206,400. Plant and equipment necessary to establish the giftware business will require an additional investment of $295,000. This investment will depreciate on the MACRS schedule over 3 years. After 4 years, the equipment will have an economic and book value of zero. The firms tax rate is 30%. The discount rate is 20%. Use the MACRS depreciation schedule.
a. What is the net present value of the project?
Note: 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

Step: 3

blur-text-image

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

International Finance Theory And Policy

Authors: Paul Krugman, Maurice Obstfeld, Marc Melitz

12th Global Edition

1292417005, 978-1292417004

More Books

Students also viewed these Finance questions

Question

What are the APPROACHES TO HRM?

Answered: 1 week ago