We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year Unit Sales 93,500 105,500 128,500 134,500 87,500 1. The new system will be priced to sell at $390 each. The cockroach eradicator project will require $1,500,000 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 $270, and total fixed costs are $1,000,000 per year. The equipment necessary to begin production will cost a total of $20 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 14%. 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 Unit Sales 93,500 105,500 128,500 134,500 87,500 1. The new system will be priced to sell at $390 each. The cockroach eradicator project will require $1,500,000 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 $270, and total fixed costs are $1,000,000 per year. The equipment necessary to begin production will cost a total of $20 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 14%. 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 $

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 19P

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We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year Unit Sales 1 98,500 110,500 133,500 139,500 92,500 2 3 4 5 The new system will be priced to sell at $450 each. The cockroach eradicator project will require $1,700,000 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 $320, and total fixed costs are $2,000,000 per year. The equipment necessary to begin production will cost a total of $20 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 18%. 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 NPV Unit Sales 95,500 107,500 130,500 136,500 89,500 The new system will be priced to sell at $420 each. The cockroach eradicator project will require $1,900,000 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 $290, and total fixed costs are $1,400,000 per year. The equipment necessary to begin production will cost a total of $17 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 18%. 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.)