Question
Tokyo Power Design is evaluating a project. Initially, annual sales will be $20,889,366, and costs will be $8,145,239. Both sales and costs will grow at
Tokyo Power Design is evaluating a project. Initially, annual sales will be $20,889,366, and costs will be $8,145,239. Both sales and costs will grow at a decimal growth rate of 0.01 each year. The project horizon is 6 years and will require net working capital of $381,617. The initial capital expenditure is $3,717,352. The project will be depreciated using the MACRS-3 schedule, which is (0.3333 0.4445 0.1481 0.0741). At the end of the project, there will be $1,841,029 pre-tax salvage value. The tax rate is 0.31. Investors expect a 0.12 rate of return. What is the NPV?
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