Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are thinking about buying a printing press today that will print t-shirts for many years including the celebration of a DePaul Women's Soccer National
You are thinking about buying a printing press today that will print t-shirts for many years including the celebration of a DePaul Women's Soccer National Championship.
-
- The machine will cost $9mm to buy and $2mm to install today. You will place the equipment in a building your uncle let you use rent free forever. He paid $4mm for the building.
- For working capital, assume that you must have an increase in accounts receivable of $4mm, an inventory increase of $3mm and an accounts payable increase of $1mm. You will use the machine for regular printing jobs; these jobs will produce $4.5mm of positive after-tax cash flow per year (assume the cash flows start after one year and end after 15 total years).
- The victory will produce a special one time extra after-tax cash flow of $4.97mm in 4 years from now because of the National Championship.
- Your WACC is 14%. Your tax rate is 30%.
- At the end of 15 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 $2mm.
What is the NPV of the project? Round to the nearest $mm; no decimal places. $45mm would be the form of a correct answer. Hint...you should come pretty close to a nice round number.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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