Question# 21-
We believe we can sell 870,000 home security devices per year at $45 per piece. They cost $18 to manufacture (variable cost). Fixed production costs run $215,000 per year. The necessary equipment costs $785,000 to buy and would be depreciated at a 25% CCA rate. The equipment would have a zero salvage value after the five-year life of the project. We need to invest $140,000 in net working capital up front; no additional net working capital investment is necessary. The discount rate is 19%, and the tax rate is 35%. What is the NPV of the project? (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.)
Year | 0 | 1 | 2 | 3 | 4 | 5 |
Sales Revenue (870,000 x $45) | $ 39,150,000 | $ 39,150,000 | $ 39,150,000 | $ 39,150,000 | $ 39,150,000 | |
Less: Variable Cost (870,000 x $18) | $ 15,660,000 | $ 15,660,000 | $ 15,660,000 | $ 15,660,000 | $ 15,660,000 | |
Less: Fixed Cost | $ 215,000 | $ 215,000 | $ 215,000 | $ 215,000 | $ 215,000 | |
Less: Depreciation (see below) | $ 98,125 | $ 171,719 | $ 128,789 | $ 96,592 | $ 72,444 | |
Net Operating Income | $ 23,176,875 | $ 23,103,281 | $ 23,146,211 | $ 23,178,408 | $ 23,202,556 | |
Less: Tax @ 35% | $ 8,111,906 | $ 8,086,148 | $ 8,101,174 | $ 8,112,443 | $ 8,120,895 | |
Net Income | $ 15,064,969 | $ 15,017,133 | $ 15,045,037 | $ 15,065,965 | $ 15,081,661 | |
Add: Depreciation | $ 98,125 | $ 171,719 | $ 128,789 | $ 96,592 | $ 72,444 | |
Net Operating Cash Flow | $ 15,163,094 | $ 15,188,852 | $ 15,173,826 | $ 15,162,557 | $ 15,154,105 | |
Salvage Value | $ - | |||||
Initial investment | $ (785,000) | |||||
Working Capital | $ (140,000) | $ 140,000 | ||||
Net Cash Flow | $ (925,000) | $ 15,163,094 | $ 15,188,852 | $ 15,173,826 | $ 15,162,557 | $ 15,294,105 |
Discount Rate @ 19% | $ 1.00000 | $ 0.84034 | $ 0.70616 | $ 0.59342 | $ 0.49867 | $ 0.41905 |
Present Value | $ (925,000) | $ 12,742,096 | $ 10,725,833 | $ 9,004,388 | $ 7,561,093 | $ 6,408,985 |
NPV | $ 45,517,395 | |||||
CCA calculation | ||||||
Year | Beginning Bal. | CCA (25% x Begin. Bal.) | Ending Bal. | |||
1 | $785,000 | $98,125 | $686,875 | |||
2 | $686,875 | $171,719 | $515,156 | |||
3 | $515,156 | $128,789 | $386,367 | |||
4 | $386,367 | $96,592 | $289,775 | |||
5 | $289,775 | $72,444 | $217,332 |
Question# 21- We believe we can sell 870,000 home security devices per year at $45 per...
We believe we can sell 870,000 home security devices per year at $45 per piece. They cost $18 to manufacture (variable cost). Fixed production costs run $215,000 per year. The necessary equipment costs $785,000 to buy and would be depreciated at a 25% CCA rate. The equipment would have a zero salvage value after the five-year life of the project. We need to invest $140,000 in net working capital up front; no additional net working capital investment is necessary. The...
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We believe we can sell 450,000 home security devices per year at $93 per piece. They cost $74 to manufacture (variable cost). Fixed production costs run $215,000 per year. The necessary equipment costs $785,000 to buy and would be depreciated at a 25% CCA rate. The equipment would have a zero salvage value after the five-year life of the project. We need to invest $140,000 in net working capital up front; no additional networking capital investment is necessary. The discount...
Question 11 10 points Saved We believe we can sell 75,000 home security devices per year at $200 per piece. They cost $120 to manufacture (variable cost). Fixed production costs run $215,000 per year. The necessary equipment costs $785,000 to buy and would be depreciated at a 25% CCA rate. The equipment would have a zero salvage value after the five-year life of the project. We need to invest $140,000 in net working capital up front; no additional net working...
Question 1 10 points Save Answer We believe we can sell 450,000 home security devices per year at $93 per piece. They cost $74 to manufacture (variable cost). Fixed production costs run $215,000 per year. The necessary equipment costs $785,000 to buy and would be depreciated at a 25% CCA rate. The equipment would have a zero salvage value after the five-year life of the project. We need to invest $140,000 in net working capital up front; no additional net...
pls help Asap! show calculations in writting
10 points Save Answe We believe we can sell 75,000 home security devices per year at $200 per piece. They cost $120 to manufacture (variable cost yFixed production costs run $215,000 per year. The necessary equipment costs $785,000 to buy and would be depreciated at a 25% CCA rate. The equipment would have a zero salvage value after the five-year life of the project. We need to invest $140,000 in net working capital...
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