Question
The managers of Camping World are considering manufacturing pop-up campers. They expect to sell 250 campers annually for the next 6 years, and believe that
The managers of Camping World are considering manufacturing pop-up campers. They expect to sell 250 campers annually for the next 6 years, and believe that they can sell them for $5000 per camper. The necessary plant and equipment to produce the campers will require an initial outlay of $950,000, which will be depreciated straight line to zero over the projects life. The firm expects to be able to dispose of the manufacturing equipment for $125,000 at the end of the project. Labor and material costs total $2500 per camper, and fixed costs are $175,000 per year. Camping World has a tax rate of 34% and a 13% discount rate.
- Suppose that this project requires an investment in working capital of 200,000, but all else remains the same. What is the cash flow in time 1-time 5? ($350,833)
- Now what is the NPV? ($388,164)
How do I solve for these?
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