A company sells Gizmos to consumers at a price of $90 per unit. The costs to produce Gizmos is $38 per unit. The company willsell 14,000 Gizmos to consumers each year. The fixed costs incurred each year will be $180,000. There is an initial investment toproduce the goods of $3,800,000 which will be depreciated straight line over 11 year life of the investment to a salvage value of$0. The opportunity cost of capital is 9% and the tax rate is 31%.A. What is operating cash flow each year?B. Using an operating cash flow of 485, 210.91 each year, what is the NPV of this project?C. Given a net present value of $-498, 047.3, should the company accept or reject this project?D. Find the net present value break-even level of units sold. Round your answer to the nearest whole unit

Operating Cashflow = PAT +Depreciation

Answered: A company sells Gizmos to consumers at…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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