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 Year 94,000 106,000 129,000 135,000 88,000 4 The new system

image text in transcribed

We project unit sales for a new household-use laser-guided cockroach search and destroy system as Year 94,000 106,000 129,000 135,000 88,000 4 The new system will be priced to sell at $400 each. The cockroach eradicator project will require $1,600,000 in net working capital to start, and total net working capital will rise to 15 percent of the change in sales. The variable cost per unit is $275, and total fixed costs are $1,100,000 per year. The equipment necessary to begin production will cost a total of $15 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20 percent. In five years, this equipment will actually be worth about 20 percent of its cost. The relevant tax rate is 35 percent, and the required return is 15 percent. 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.) NPV

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

Inside And Outside Liquidity

Authors: Bengt Holmstroem, Jean Tirole

1st Edition

0262518538, 9780262518536

More Books

Students also viewed these Finance questions