We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year 1 2 3 4 5 Unit Sales 102,000 114,000 137,000 143,000 96,000 The new system will be priced to sell at $485 each. The cockroach eradicator project will require $1,600,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $355, and total fixed costs are $2,700,000 per year. The equipment necessary to begin production will cost a total of $23 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost. The relevant tax rate is 35%, and the required return is 19%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) NPV
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows: Year 1 2 3 4 5 Unit Sales 102,000 114,000 137,000 143,000 96,000 The new system will be priced to sell at $485 each. The cockroach eradicator project will require $1,600,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $355, and total fixed costs are $2,700,000 per year. The equipment necessary to begin production will cost a total of $23 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost. The relevant tax rate is 35%, and the required return is 19%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) 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
Transcribed Image Text:We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:
Year
1
2
3
4
5
Unit Sales
102,000
114,000
137,000
143,000
96,000
The new system will be priced to sell at $485 each.
The cockroach eradicator project will require $1,600,000 in net working capital to start, and total net working capital will rise to 15%
of the change in sales. The variable cost per unit is $355, and total fixed costs are $2,700,000 per year. The equipment necessary to
begin production will cost a total of $23 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of
20%. In five years, this equipment will actually be worth about 20% of its cost.
$
The relevant tax rate is 35%, and the required return is 19%. Based on these preliminary estimates, what is the NPV of the project?
(Enter the answer in dollars. Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $
sign in your response.)
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 3 steps with 2 images
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