QUESTION 13 The Bruin's Den Outdoor Gear is considering a new 6-year project to produce a new tent line. The equip necessary would cost $1.29 million and be depreciated using straight-line depreciation to a book value o end of the project, the equipment can be sold for 15 percent of its initial cost. The company believes that 23,500 tents per year at a price of $64 and variable costs of $25 per tent. The fixed costs will be $395,00 The project will require an initial investment in net working capital of $193,000 that will be recovered at th project. The required rate of return is 10.7 percent and the tax rate is 35 percent. What is the NPV?
QUESTION 13 The Bruin's Den Outdoor Gear is considering a new 6-year project to produce a new tent line. The equip necessary would cost $1.29 million and be depreciated using straight-line depreciation to a book value o end of the project, the equipment can be sold for 15 percent of its initial cost. The company believes that 23,500 tents per year at a price of $64 and variable costs of $25 per tent. The fixed costs will be $395,00 The project will require an initial investment in net working capital of $193,000 that will be recovered at th project. The required rate of return is 10.7 percent and the tax rate is 35 percent. What is the NPV?
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
Related questions
Question
A1
Transcribed Image Text:QUESTION 13
The Bruin's Den Outdoor Gear is considering a new 6-year project to produce a new tent line. The equipment
necessary would cost $1.29 million and be depreciated using straight-line depreciation to a book value of zero. At the
end of the project, the equipment can be sold for 15 percent of its initial cost. The company believes that it can sell
23,500 tents per year at a price of $64 and variable costs of $25 per tent. The fixed costs will be $395,000 per year.
The project will require an initial investment in net working capital of $193,000 that will be recovered at the end of the
project. The required rate of return is 10.7 percent and the tax rate is 35 percent. What is the NPV?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education