Question
Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. To pursue this opportunity, the company would need to
Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. To pursue this opportunity, the company would need to purchase a piece of equipment for $130,000. The equipment would have a useful life of five years and zero salvage value. It would be depreciated for financial reporting and tax purposes using the straight-line method. After careful study, Winthrop estimated the following annual costs and revenues for the new product: Annual revenues and costs: Sales revenues $ 250,000 Variable expenses $ 120,000 Fixed out-of-pocket operating costs $ 70,000 The companys tax rate is 30% and its after-tax cost of capital is 15%.
What is the Net Present Value?
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