A new project involves the purchase of a $9000 food processing machine. The machine would be depreciated on a straight-line basis over its 3-year useful life to a book value of $672. At the end of the life of the project (at the year 3 point), the machine will be sold for an estimated $120. The project will cause an increase in Sales of $6,354 in each of years 1 through 3. It is also expected to enhance efficiencies and reduce operating expenses by $1,784 in each of years 1 through 3. The project will require an increase in Accounts Receivable of $1,087 and an increase in Accounts Payable of $1,200 up front. The project's impact on these accounts is expected to disappear at project end (in year 3). The firm's marginal tax rate is 40 %, and its WACC is 12%. The NPV of this project is $ Round your final answer to 2 decimal places (example: if your answer is 12.3456, you should enter 12.35).

A new project involves the purchase of a $9000 food processing machine. The machine would be depreciated on a straight-line basis over its 3-year useful life to a book value of $672. At the end of the life of the project (at the year 3 point), the machine will be sold for an estimated $120. The project will cause an increase in Sales of $6,354 in each of years 1 through 3. It is also expected to enhance efficiencies and reduce operating expenses by $1,784 in each of years 1 through 3. The project will require an increase in Accounts Receivable of $1,087 and an increase in Accounts Payable of $1,200 up front. The project's impact on these accounts is expected to disappear at project end (in year 3). The firm's marginal tax rate is 40 %, and its WACC is 12%. The NPV of this project is $ Round your final answer to 2 decimal places (example: if your answer is 12.3456, you should enter 12.35).

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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