Question

A company is considering a new project requiring an upfront fixed-asset investment of $1,000,000 with an economic life of five years. Depreciation is taken on a straight-line basis, with no expected salvage value. Net working capital required immediately is expected to be $100,000 and will be recovered in full upon the project's completion in five years. In the expected-scenario forecast, the annual sales volume is 50,700 units, while the sale price is $137 per unit with a variable cost of $87 per unit. Annual fixed costs are estimated to $1,185,000. If the appropriate discount rate is 12.75% and the tax rate 30%, what is the project's NPV?

	$2,511,367
	$2,574,151
	$2,636,935
	$2,699,719
	$2,762,503

Answer 1