Question
In: Finance
Thurnston Petroleum is considering a new project that complements its existing business. The machine required for...
Thurnston Petroleum is considering a new project that complements
its existing business. The machine required for the project costs
$4.35 million. The marketing department predicts that sales related
to the project will be $2.45 million per year for the next four
years, after which the market will cease to exist. The machine will
be depreciated to zero over its 4-year economic life using the
straight-line method. Cost of goods sold and operating expenses
related to the project are predicted to be 25 percent of sales. The
company also needs to add net working capital of $175,000
immefiately. The additional net working capital will be recovered
in full at the end of the projects life. The tax rate is 25 percent
and the required return for the project is 10 percent.
What is the value of the NPV for this project?
Should the company proceed with the project?
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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