Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $1550. The production cost of each
You are considering starting a new factory producing small electric heaters. Each unit will sell at a price of $1550. The production cost of each heater is $1280. You are expecting to sell 670 units per year. This project has an economic life of 6 years. The project requires an investment of $590000 in plants and equipment. This equipment will be depreciated to zero salvage value based on 5-year MACRS schedule. The depreciation rates from year 1 to 6 are 20%,32%,19.2%,11.52%,11.52%, and 5.76 percent, respectively. The company will sell its old equipment for $45000. The old machine is fully depreciated. The required rate of retum for the project is 12 percont, the working capital requirement is 15 percent of the next year's sales revenue. The marginal corporate tax rate is 21 percent. At the termination of the project, the plant and equipment will be sold for an estimated value of $34000. Based on these assumptions, estimate the not present value of the project. 513196131962356.3461789
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started