Question
Your company has come up with a new product with a 3-year life. Your firm paid $30,000 for an intern to perform a financial analysis
Your company has come up with a new product with a 3-year life. Your firm paid $30,000 for an intern to perform a financial analysis last month to determine the potential demand for the product.It is felt that the new product will generate sales of $500,000 per year. The fixed costs associated with this will be $90,000 per year, and variable costs will amount to 20 percent of sales. The initial investment in equipment necessary for production of the product will cost $300,000 and will be depreciated in a straight line manner for the three years of the products life to a salvage value of zero. There is no salvage value. Needed Net working capital levels are projected as follows: $10,000 for Year 1; $15,000 for Year 2; $0 for Year 3. Your firm has a tax rate of 40%. Your firm's required rate of return on projects with the same risk as this product is 10%. Calculate The NPV of this project in excel please?
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