You run a second-hand university textbook business. Currently, you specialise in business and law, but you are thinking of expanding into science, health, and engineering. You need to expand your physical space and enhance your online presence. This will require a capital investment of $300,000. The idea also requires $55,000 in working capital. Use the information below to compute the net present value (NPV) of this idea.

Sales are expected to be 4,000 books (units) per year.

Selling price for a book is $60 per unit.

Unit sales are expected to grow with the student population at the city universities. This is 3 percent p.a.

You will need to employ a casual staff member. Initially, this will cost $20,000 p.a. (year 1). But the wages increase at 2.50 percent p.a.

Variable costs are $8 per unit sold.

Fixed costs are $15,000 in year 1, growing at 3 percent p.a.

You undertook some market research at a cost of $10,000. If the project goes ahead, you will spend a further $10,000 p.a. in market research, establishing connections to ensure the stable flow of second-hand product.

You will add $5,000 p.a. to your advertising spend if you do this project.

Depreciation of the capital investment is straight-line to zero.

The project has a 10-year life.

The cost of capital is 16 percent, and the taxation rate is 25 percent.

All working capital is returned at the end.

a.

$334,726

b.

$339,022

c.

$148,701

d.

- $206,373

e.

$305,774