Question
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year 1 2 Unit Sales 103,000 115,000 3
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year 1 2 Unit Sales 103,000 115,000 3 5 138,000 144,000 97,000 The new system will be priced to sell at $495 each. The cockroach eradicator project will require $1,800,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $365, and total fixed costs are $2,900,000 per year. The equipment necessary to begin production will cost a total of $24 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost. The relevant tax rate is 35%, and the required return is 15%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV
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