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Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This cost will be depreciated straight-line to $20,000 over the project’s five-year life. At the end of the project life, the installed machine can be scrapped and sold for $27,265. The machine will add $185,000 per year as sales and incur an additional $55,000, but will decrease $7,368 from the existing product line's sales. The system requires an initial investment in net working capital of $38,815. The NWC level will be maintained throughout the project years and recoverable at the end of the project. Assume the cost of capital is 6.5%, and Gamma Inc. belongs to the 35% tax bracket. Compute the NPV of the project and determine whether you will invest in this project. Round your answer to two decimal places.
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jeff jeffy answered 1 year agoRelated Solutions
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed
cost of $520,000. This cost will be depreciated straight-line to
$20,000 over the project’s five-year life. At the end of the
project life, the installed machine can be scrapped and sold for
$27,644. The machine will add $185,000 per year as sales and incur
an additional $55,000, but will save $22,983 from the existing
product line. The system requires an initial investment in net
working capital of $42,315....
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed
cost of $520,000. This cost will be depreciated straight-line to
$20,000 over the project’s five-year life. At the end of the
project life, the installed machine can be scrapped and sold for
$27,644. The machine will add $185,000 per year as sales and incur
an additional $55,000, but will save $22,983 from the existing
product line. The system requires an initial investment in net
working capital of $42,315....
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed
cost of $520,000. This cost will be depreciated straight-line to
$20,000 over the project’s five-year life. At the
end of the project life, the installed machine can be scrapped and
sold for $27,701. The machine will add $185,000 per year as sales
and incur an additional $55,000, but will decrease $9,578 from the
existing product line's sales. The system requires an initial
investment in net working capital of...
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed
cost of $520,000. This cost will be depreciated straight-line to
$20,000 over the project’s five-year life. At the end of the
project life, the installed machine can be scrapped and sold for
$26,694. The machine will add $185,000 per year as sales and incur
an additional $55,000, but will save $18,524 from the existing
product line. The system requires an initial investment in net
working capital of $32,858....
Gamma Inc. is looking at a new product line with an installed cost of $520,000. This...
Gamma Inc. is looking at a new product line with an installed
cost of $520,000. This cost will be depreciated straight-line to
$20,000 over the project’s five-year life. At the
end of the project life, the installed machine can be scrapped and
sold for $28,797. The machine will add $185,000 per year as sales
and incur an additional $55,000, but will decrease $6,794 from the
existing product line's sales. The system requires an initial
investment in net working capital of...
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