Question
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: YearUnit Sales year1 = 94,500 year2= 106,500 year3= 129,500
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:
YearUnit Sales
year1 = 94,500
year2= 106,500
year3= 129,500
year4= 135,500
year5= 88,500
The new system will be priced to sell at $410 each.
The cockroach eradicator project will require $1,700,000 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 $280, and total fixed costs are $1,200,000 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 16%. 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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