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 55,200 units, while the sale price is $149 per unit with a variable cost of $99 per unit. Annual fixed costs are estimated to $1,290,000. If the appropriate discount rate is 13.50% and the tax rate 30%, what is the project's NPV?
options: $2,463,377
$2,531,804
$2,600,231
$2,668,659
$2,737,086

Answer 1