Problem 9-34 Project Evaluation (LO4)The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of thegiftware is $25.Year1234ThereafterUnit Sales25,00045,00029,0005,0000It is expected that net working capital will amount to 20% of sales in the following year. For example, the storewill need an initial (Year O) investment in working capital of .20 × 25,000 × $40 = $200,000. Plant and equipmentnecessary to establish the giftware business will require an additional investment of $275,000. This investmentwill depreciate on the MACRS schedule over 3 years. After 4 years, the equipment will have an economic andbook value of zero. The firm's tax rate is 30%. The discount rate is 20%. Use the MACRS depreciation schedule.a. What is the net present value of the project?Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.a. Net present valueb. Increase in NPV

Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment or…

Answered: The following table presents sales…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 12PROB

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