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Tou are practicing for Exam 2 and come across a project evaluation problem that includes the following stimates: - The life of the project is
Tou are practicing for Exam 2 and come across a project evaluation problem that includes the following stimates: - The life of the project is 7 years - The project will require additional equipment that will cost $21,000. None of the equipment will have any salvage value (you realize that this means no need to worry about after tax salvage value, and said "nice"). - Sales are expected to be 10,000 units per year at $4.50 per unit - Variable costs are expected to be $2.60 per unit - Fixed costs are expected to be $12,000 per year - The annual Depreciation expense would be $3,000 - Additional Net Working Capital will be needed in Year 0 in the amount of $8,000.60% of this will be recovered in Year 7 - The company's tax rate is 20% - The Required Rate of Return on the project is 10% What is the project's Net Present Value? $921.04 $3,167.68 $3,647,36 $8,543,04
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