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In: Finance

A company sells Widgets to consumers at a price of $83 per unit. The cost to...

A company sells Widgets to consumers at a price of $83 per unit. The cost to produce Widgets is $30 per unit. The company will sell 15,000 Widgets to consumers each year. The fixed costs incurred each year will be $220,000. There is an initial investment to produce the goods of $2,700,000 which will be depreciated straight line over the 17 year life of the investment to a salvage value of $0. The opportunity cost of capital is 13% and the tax rate is 37%. Operating cash flow is $421,014.71. NPV is $133047.13.

What is the NPV of the project if inventories must be increased at the start of the project (year 0) by $400,000 and will be recovered at the end (year 17). Answer is -216,865.71. Please show details calculation how to get the answer is -216,865.71. Dont use the excel!!!! Thank you !!!!

Solutions

Expert Solution

NO EXCEL FUNCTION IS USED. JUST WRITTEN IN EXCEL. EVEN PVIFA AND PVIF IS ALSO CALCULATED MANUALLY

OCF WAS GIVEN, SO DID NOT CALCULATE. IF YOU WANT ME TO CALCULATE OCF, LET ME KNOW.

jeff jeffy answered 6 months ago
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