Question
In: Finance
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:...
We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:
| Year | Unit Sales |
| 1 | 99,500 |
| 2 | 111,500 |
| 3 | 134,500 |
| 4 | 140,500 |
| 5 | 93,500 |
The new system will be priced to sell at $460 each.
The cockroach eradicator project will require $1,900,000 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 $330, and total fixed costs are $2,200,000 per year. The equipment necessary to begin production will cost a total of $21 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 14%. Based on these preliminary estimates, what is the NPV of the project? (Enter the answer in dol
Solutions
Expert Solution
Based on the given data, pls find below workings and NPV:
The NPV of the Project is $ 11021239.81
jeff jeffy answered 1 year agoRelated Solutions
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We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:...
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94,000
2
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3
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The new system will be priced to sell at $400 each.
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