In: Finance
b) Mmasodwo Enterprice is considering investing in a
machine to produce computer keyboards. The price of the machine
will be ¢530,000 and its economic life is five years. The machine
will be fully depreciated by the straight-line method. The machine
will produce 15,000 keyboards each year. The price of each keyboard
will be ¢40 in the first year and will increase by 5 percent per
year. The production cost per keyboard will be ¢20 in the first
year and will increase by 6 percent per year. The project will have
an annual fixed cost of ¢75,000 and require an immediate investment
of ¢25,000 in net working capital. The corporate tax rate for the
company is 34 percent. If the appropriate discount rate is 15
percent, what is the NPV of the investment?