Your company has been doing well, reaching $1.02 million in earnings, and is considering launching a new product. Designing the new product has already cost $464,000. The company estimates that it will sell 780,000 units per year for $2.94 per unit and variable non-labor costs will be $1.19 per unit. Production will end after year 3. New equipment costin 51.06 million will be required. The equipment will be depreciated to zero using the 7-year MACRS schedule. You plan to sell the equipment for book value at the end of year 3. Your current level of working capital is $309,000. The new product will require the working capital to increase to a level of $374,000 immediately, then to $400,000 in year 1, in year 2 the level will be $348,000, and finally in year 3 the level will return to $309,000. Your tax rate is 21%. The discount rate for this project is 10.4%. Do the capital budgeting analysis for this project and calculate its NPV.
Note: Assume that the equipment is put into use in year 1.
Your company has been doing well, reaching $1.02 milion in earnings, and is considering launching a new product Designing the now product has already cost $464, 000. The compary estimates that it will sell 780,000 units per year for $2.94 per unit and varlable non-labor costs will be $1.19 per unit. Production will end after year 3 . New equipment costin 51.06 milion wil be requied. The equipment will be depreciated to zeto using the T-yeat MACRS schedule. You plan to sell the equipment for book value at the end of year 3 . Your current tevel of working capital is $309.000. The new product will require the working capital to increase to a level of 5374,000 immedately, then to $400, 000 in year 1 , in year 2 the Level will be 5348,000 , and finally in year 3 the level will return to 5309,000 . Your tax rate is 21%. The discount rate for this project is 10.4%. Do the capital bedgeting analysis for this project and calculate its NPV. Note' Assume that the equipment is put mito use in year 1 . Design already happened and is (irrelevant). (Solect from the drop-down menu) According to the 7 year MACRS schedule, depreciation in year 1 will be 3 (Round to the nearest dollar) Depreciation in year 2 will be 1 (Rooud to the nearest dollar). Depreciation in year 3 will be 5 (Round to the nearest dollar) e 5 e Fall 2022 Your company has been doing well, reaching $1.02 million in earnings, and is considering launching a new product. Desigr company estimates that it will sell 780,000 units per year for $2.94 per unit and variable non-labor costs will be $1.19 per u $1.06 million will be required. The equipment will be depreciated to zero using the 7-year MACRS schedule. You plan to se current level of working capital is $309,000. The new product will require the working capital to increase to a level of $374,0 level will be $348,000, and finally in year 3 the level will return to $309,000. Your tax rate is 21%. The discount rate for this project and calculate its NPV. Note: Assume that the equipment is put into use in year 1. Complete the capital budaetina analvsis for this proiect below: (Round to the noarant dnilar ) Your company has been doing well, reaching $1.02 million in earnings, and is considering launching a new product. Design company estimates that it will sell 780,000 units per year for $2.94 per unit and variable non-labor costs will be $1.19 per ur $1.06 million will be required. The equipment will be depreciated to zero using the 7 -year MACRS schedule. You plan to sel current level of working capital is $309,000. The new product will require the working capital to increase to a level of $374,00 level will be $348,000, and finally in year 3 the level will return to $309,000. Your tax rate is 21%. The discount rate for this p project and calculate its NPV. Note: Assume that the equipment is put into use in year 1. (Kound to the nearest dollar.)
