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: The new system will be priced to sell at

image text in transcribed

We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: The new system will be priced to sell at $425 each. The cockroach eradicator project will require $2,000,000 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 $295, and total fixed costs are $1,500,000 per year. The equipment necessary to begin production will cost a total of $17 million. This equipment is mostly industrial machinery and thus qualifles 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 19%. 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.)

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

Bond Markets Analysis And Strategies

Authors: Frank J. Fabozzi

4th Edition

0130402664, 9780130402660

More Books

Students also viewed these Finance questions

Question

Have metrics for the action been established?

Answered: 1 week ago