Question

The Johnny Pickles Brewing Company has been successful as a small craft microbrewery with a focus on distributing its products to bars and restaurants. They are considering a bottling line that will allow them to start distributing to grocery and party stores. The equipment will cost $83470 to purchase. It's expected that additional sales will be $29518 per year while variable expenses are expected to increase $4490 annually. The equipment is expected to last 5 years and will need a one time overhaul in year 3 that will cost $8141. It will have no salvage value at the end of its useful life. The Johnny Pickles Brewing Company uses a discount rate of 11% when deciding to accept a project. What is the net present value of the project? Round your answer to the whole dollar. If the NPV is negative, enter as a negative. If it's positive, enter as a positive. show work in excel with control~

Answer 1

Statement Showing computation of Net Present Value
Year	0	1	2	3	4	5	Total
Cost of Equipment	-$83,470	$0	$0	$0	$0	$0	-$83,470
Overhaul Cost	$0	$0	$0	-$8,141	$0	$0	-$8,141
Increase in Sales	$0	$29,518	$29,518	$29,518	$29,518	$29,518	$1,47,590
Variable Expense	$0	$4,490	$4,490	$4,490	$4,490	$4,490	$22,450
Cash Flow (a)	-$83,470	$34,008	$34,008	$25,867	$34,008	$34,008	$78,429
PVF@11% (b)	1.000	0.901	0.812	0.731	0.659	0.593
Present Value (a*b)	-$83,470	$30,638	$27,602	$18,914	$22,402	$20,182	$36,267
Hence NPV would be $36267