BASIC INFORMATION: A three-year project will cost $60,000 to construct. This will be depreciated straight-line to...
BASIC INFORMATION: A three-year project will cost $60,000 to
construct. This will be depreciated straight-line to zero over the
three-year life. The price per unit sold is $20 and the variable
cost per unit sold is $10. Fixed costs are $30,000 per year.
In addition to the BASIC INFORMATION, you find that a salvage
company will pay you $10,000 for the assets at the end of year 3.
The project will require an investment of $10,000 up front for net
working capital. If you expect to sell 7,000 units per year,
compute the NPV assuming a required return of 15% and a tax rate of
30%.
A. Less than $0
B. $11,347
C. $14,416
D. $18,807
E. More than $20,000
The answer is D, please show all the steps, thanks!
Homework Answers
Please refer to below spreadsheet for calculation and answer. Cell reference also provided.
Cell reference -
Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.
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