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USE THE FOLLOWING DATA FOR THE FINAL 3 QUESTIONS 22nd Century Pest Control, Inc., is considering developing a new type of mouse trap. They have
USE THE FOLLOWING DATA FOR THE FINAL 3 QUESTIONS
22nd Century Pest Control, Inc., is considering developing a new type of mouse trap. They have made the following estimates regarding the development of the new product:
- 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.
- 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 companys tax rate is 34%
- The Required Rate of Return on the project is 11%
Based on the project's NPV, should the company accept or reject the project?
What is the project's annual Operating Cash Flow?
What is the Year 0 Total Cash Flow?
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