Pappy’s Potato has come up with a new product, the Potato Pet. Pappy’s paid $50,000 for a marketing survey to determine the viability of the product. It is estimated that Potato Pet will generate sales of $780,000 per year. The fixed costs associated with this project will be $178,000 per year and variable costs will amount to 30% of sales. The equipment will cost $600,000 and be depreciated in a straight-line manner for the four years of the project life. It can be sold for $20,000 at the end of the project. The initial net operating working capital is $40,000 and will increase by $10,000 each year until the end of the project. Pappy’s is paying a 25% tax rate and has a required rate of return of 6%.The NPV of this project is $__________________.
Pappy’s Potato has come up with a new product, the Potato Pet. Pappy’s paid $50,000 for a marketing survey to determine the viability of the product. It is estimated that Potato Pet will generate sales of $780,000 per year. The fixed costs associated with this project will be $178,000 per year and variable costs will amount to 30% of sales. The equipment will cost $600,000 and be
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