Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year Unit Sales 1 95,000 2 107,000 3 130,000

  • We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year Unit Sales 1 95,000 2 107,000 3 130,000 4 136,000 5 89,000 The new system will be priced to sell at $415 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 $285, and total fixed costs are $1,300,000 per year. The equipment necessary to begin production will cost a total of $16 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 17%. Based on these preliminary estimates, what is the NPV of the project?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Investments

Authors: Zvi Bodie

12th Edition

1260819426, 9781260819427

More Books

Students also viewed these Finance questions

Question

Did the researcher provide sufficient description?

Answered: 1 week ago