Question
The Meldrum Co. expects to sell 3,000 units, 15 percent, of a new product. The variable cost per unit is $8, 5 percent, and the
The Meldrum Co. expects to sell 3,000 units, 15 percent, of a new product. The variable cost per unit is $8, 5 percent, and the annual fixed costs are $12,500, 5 percent. The annual depreciation expense is $4,000 and the sale price is $18 a unit, 2 percent. The project requires $24,000 of fixed assets which will be worthless when the project ends in six years. Also required is $6,500 of net working capital for the life of the project. The tax rate is 21 percent and the required rate of return is 12 percent. What is the net present value of the pessimistic scenario?
A. $13,810.29
B. $14,008.16
C. $12,979.40
D. $8,308.15
E. $10,146.18
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