Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand for a new line of solar-charged motorcycles (who wants to ride on a cloudy day anyway?) The proposed project has the following features: • The firm just spent $300,000 for a marketing study to determine consumer demand (@ t=0). • Aero Motorcycles purchased the land the factory will be built on 5 years ago for $2,000,000 and owns it outright (that is, it does not have a mortgage). The land has a current market value of $2,895,180. • The project has an initial cost of $ 20000000 excluding land, hint: the land is not subject to depreciation). • If the project is undertaken, at t=0 the company will need to increase its inventories by $3,500,000, accounts receivable by $ 1500000 and its accounts payable by $2,000,000. This net operating working capital will be recovered at the end of the project's life (t = 10). • If the project is undertaken, the company will realize an additional $8,000,000 in sales over each of the next ten years.(i.e. sales in each year are $8,000,000) • The company's operating cost (not including depreciation) will equal 50% of sales. • The company's tax rate is 35 percent. • Use a 10-year straight-line depreciation schedule. • Att= 10, the project is expected to cease being economically viable and the factory (including land) will be sold for $ 4500000 assume land has a book value equal to the original purchase price). • The project's WACC = 10 percent • Assume the firm is profitable and able to use any tax credits (ie negative taxes). What is the project's NPV? Round to nearest whole dollar value.

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand for a new line of solar-charged motorcycles (who wants to ride on a cloudy day anyway?) The proposed project has the following features:
• The firm just spent $300,000 for a marketing study to determine consumer demand (@ t=0).
• Aero Motorcycles purchased the land the factory will be built on 5 years ago for $2,000,000 and owns it outright (that is, it does not have a mortgage). The land has a current market value of $2,895,180.
• The project has an initial cost of $ 20000000 excluding land, hint: the land is not
subject to depreciation).
• If the project is undertaken, at t=0 the company will need to increase its inventories by $3,500,000, accounts receivable by $ 1500000 and its accounts payable by $2,000,000. This net operating working capital will be recovered at the end of the project's life (t = 10).
• If the project is undertaken, the company will realize an additional $8,000,000 in
sales over each of the next ten years.(i.e. sales in each year are $8,000,000)
• The company's operating cost (not including depreciation) will equal 50% of sales. • The company's tax rate is 35 percent.
• Use a 10-year straight-line depreciation schedule.
• Att= 10, the project is expected to cease being economically viable and the factory (including land) will be sold for $ 4500000 assume land has a book value equal to the original purchase price).
• The project's WACC = 10 percent
• Assume the firm is profitable and able to use any tax credits (ie negative taxes). What is the project's NPV? Round to nearest whole dollar value.

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Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet the demand for a new line of solar-charged motorcycles​ (who wants to ride on a cloudy day​ anyway?) The proposed project has the following​ features;
​• The firm just spent​ $300,000 for a marketing study to determine consumer demand​ (@ t=0).
​• Aero Motorcycles purchased the land the factory will be built on 5 years ago for​ $2,000,000 and owns it outright​ (that is, it does not have a​ mortgage). The land has a current market value of​ $2,526,214.
​• The project has an initial cost of​ $20,000,000 (excluding​ land, hint: the land is not subject to​ depreciation).
​• If the project is​ undertaken, at t​ = 0 the company will need to increase its inventories by​ $3,500,000, accounts receivable by​ $1,500,000, and its accounts payable by​ $2,000,000. This net operating working capital will be recovered at the end of the​ project’s life​ (t =​ 10).
​• If the project is​ undertaken, the company will realize an additional​ $8,000,000 in sales over each of the next ten years.​ (i.e. sales in each year are​ $8,000,000)
​• The company’s operating cost​ (not including​ depreciation) will equal​ 50% of sales.
​• The company’s tax rate is 35 percent.
​• Use a​ 10-year straight-line depreciation schedule.
​• At t​ = 10, the project is expected to cease being economically viable and the factory​ (including land) will be sold for $4,500,000 (assume land has a book value equal to the original purchase​ price).
​• The project’s WACC​ = 10 percent
​• Assume the firm is profitable and able to use any tax credits​ (i.e. negative​ taxes).
What is the​ project's NPV
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