You are thinking about buying a printing press today that will print t shirts for many years including the celebration of a DePaul Womens Volleyball National Championship The machine will cost $15mm to buy and $2mm to install For working capital, assume that you must have an increase in accounts receivable of $7mm, an inventory increase of $8mm and an accounts payable increase of $3mm You will use the machine for regular printing jobs these jobs will produce $6 19mm of positive after tax cash flow per year (assume the cash flows start after one year and end after 20 total years) The victory will produce a special one time extra after tax cash flow of $6 433mm in 2024 (three years from now) because of the National Championship Your WACC is 15 Your tax rate is 25 At the end of 20 years, you shut down (and sell) the machine for $5mm and liquidate the working capital Assume the machine had been depreciated to a tax value of $4mm What is the NPV of the project Round to the nearest $mm $74mm would be the form of a correct answer Hint you should come pretty close to a nice round number

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Oct 06, 2024

You are thinking about buying a printing press today that will print t-shirts for many years including the celebration of a DePaul Womens Volleyball National

You are thinking about buying a printing press today that will print t-shirts for many years including the celebration of a DePaul Womens Volleyball National Championship.

The machine will cost $15mm to buy and $2mm to install.
For working capital, assume that you must have an increase in accounts receivable of $7mm, an inventory increase of $8mm and an accounts payable increase of $3mm. You will use the machine for regular printing jobs; these jobs will produce $6.19mm of positive after-tax cash flow per year (assume the cash flows start after one year and end after 20 total years).
The victory will produce a special one time extra after-tax cash flow of $6.433mm in 2024 (three years from now) because of the National Championship.
Your WACC is 15%. Your tax rate is 25%.
At the end of 20 years, you shut down (and sell) the machine for $5mm and liquidate the working capital. Assume the machine had been depreciated to a tax value of $4mm.

What is the NPV of the project? Round to the nearest $mm. $74mm would be the form of a correct answer. Hint...you should come pretty close to a nice round number.