Question

In: Accounting

Topperton Company has developed a new industrial product. An outlay of $8 million is required for...

Topperton Company has developed a new industrial product. An outlay of $8 million is required for equipment to produce the new product, and additional net working capital of $400,000 is required to support production and marketing. In addition, a one-time $400,000 (before-tax) expense will be incurred the year that the equipment is placed into service. The equipment will be depreciated on a straight-line basis to a zero book value over 6 years. Although the depreciable life is 6 years, the project is expected to have a productive life of 8 years, and it is estimated that the equipment can be sold for $1 million at that time. Revenues minus expenses are expected to be $3 million per year. The cost of capital for this project is 14%, and the relevant tax rate is 30%. What is the NPV of the new product?

Group of answer choices

$2,956,923

$3,326,891

$3,002,696

None of these

Solutions

Expert Solution

C. $3,002,696

Explanation:

Be careful with commas while reading the figures

ekkarill92 answered 1 year ago
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