We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year 1 2 3 4 5 Unit Sales 102,000 114,000 137,000 143,000 96,000 The new system will be priced to sell at $485 each. The cockroach eradicator project will require $1,600,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $355, and total fixed costs are $2,700,000 per year. The equipment necessary to begin production will cost a total of $23 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost. The relevant tax rate is 35%, and the required return is 19%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year 1 2 3 4 5 Unit Sales 102,000 114,000 137,000 143,000 96,000 The new system will be priced to sell at $485 each. The cockroach eradicator project will require $1,600,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $355, and total fixed costs are $2,700,000 per year. The equipment necessary to begin production will cost a total of $23 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost. The relevant tax rate is 35%, and the required return is 19%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...
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