Question
What is the NPV of Girgaon's project if it has a 6-year project to produce saddles. Girgaon's project cost is $1.37 million and will be
What is the NPV of Girgaon's project if it has a 6-year project to produce saddles. Girgaon's project cost is $1.37 million and will be depreciated using straight-line depreciation to a book value of zero. The projects salvage value is 15 percent of its initial cost. Girgaon projects that it can sell 25,500 saddles per year at a price of $68 and variable costs of $28 per saddle. The fixed costs will be $435,000 per year and an initial investment in net working capital of $209,000 is required that will be recovered when Girgaon's project is dismantled. Assume that he cost of capital is 11.1 percent and the tax rate is 40 percent.
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