Alpha Company has an opportunity to manufacture and sell a new product for a 3-year period. The company's discount rate is 12%. After careful study, Alpha estimated the following costs and revenues for the new product: Cost of equipment needed £200,000 Working capital needed 50,000 Repair of the equipment in first year $5000. Salvage value of the equipment in 3 years 15000. Annual revenues and costs: Sales revenue 500,000 Variable expenses 250,000 Fixed out-of-pocket operating costs 50,000 When the project concludes in 3r years the working capital will be released for investment elsewhere within the company. What is the NPV of the project?

Alpha Company has an opportunity to manufacture and sell a new product for a 3-year period. The company's discount rate is 12%. After careful study, Alpha estimated the following costs and revenues for the new product: Cost of equipment needed £200,000 Working capital needed 50,000 Repair of the equipment in first year $5000. Salvage value of the equipment in 3 years 15000. Annual revenues and costs: Sales revenue 500,000 Variable expenses 250,000 Fixed out-of-pocket operating costs 50,000 When the project concludes in 3r years the working capital will be released for investment elsewhere within the company. What is the NPV of the project?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 18P

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