Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You've started a company to produce electrified selfie sticks. A stick will give you a mild electric shock whenever you try to take a

image text in transcribed

You've started a company to produce electrified selfie sticks. A stick will give you a mild electric shock whenever you try to take a selfie while your hand is shaking (e.g., if you are intoxicated). In fact, your hand was shaking when you came up with the idea for this business. You project the following unit sales: 1 Year A B C D E 0 1 2 3 2 Units 0 28,000 30,800 33,880 Each selfie stick is expectd to sell for $19 and will incur variable costs of $15.2 for labor and materials. In addition, you'll incur fixed costs of $53,200 every year. You will need a new machine to produce the selfie sticks. If you buy the machine now (year 0), it will start producing sticks next year (year 1). The machine costs $18,000 to purchase and install. After year 3, production will end and the new machine will be scrapped without cost or resale value. The equipment can be depreciated straight-line to zero over 3 years. Your company has a weighted average cost of capital of 19% and a marginal tax rate of 21%. Part 1 What is the cash flow in year 3? 0+ decimals Submit Attempt 3/30 for 10 pts. Part 2 What is the NPV of the investment? Attempt 2/30 for 10 pts.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Markets and Institutions

Authors: Anthony Saunders, Marcia Cornett

6th edition

9780077641849, 77861663, 77641841, 978-0077861667

More Books

Students also viewed these Finance questions