Question

Please adhere to round instructions (in red), or it will be incorrect. Please and thanks!

DQuestion 1 5 pts Atlantic Manufacturing is considering a new investment project that will last for four years. The delivered and installed cost of the machine needed for the project is $23163 and it will be depreciated according to the three-year MACRS schedule. The project also requires an initial increase in net working capital of $302. Financial projections for sales and costs are in the table below. In addition, since sales are expected to fluctuate, NWC requirements will also fluctuate. The end-of-year NWC requirements are included below (hint: these NWC capital requirements DO NOT represent the change in NWC for the period). The $0 requirement for NWC at the end of year 4 means that all NWC is recovered by the end of the project. The corporate tax rate is 35% and the required return on the project is 12%. Year 1 2 3 4 $11178 $12030 $13342 $10583 Sales Costs 2348 2810 3275 1042 NWC Requirements 323 352 217 0 What is the project's NPV? (Round answer to 2 decimal places. Do not round intermediate calculations) Topic: Capital Budgeting Problem

Answer 1

Net After- Tax cash PVIF@ Depreciati Net Depreciati After-tax Working PBT | Tax@35%| income capitalInvestmentflow $(302) (23,163.00) (23,465) 1.000 Year Revenue Costs on on OCF 12% Present value 0 1 11,178 2,3487,720 1,110 388 721 $ 7,720 8,442 $ 2 12,030 $ 2,810 $ 10,2 3 13,342 3,275 3,430 6,637 2,323 4,314 $ 3,430 7,744$ 135 4 S 10,583 1,042 1,716 S 7,825 $ 2,739 S 5,086 1,716 $ 6,802 217 (23,465.00) 7,518.37 7,627.22 5,608.26 4,460.94 (21) 29) 8,421 0.893 $ 9,568 0.797 7,8790.712 $ 7,019 0.636 $ $ (1,076) (377)(699) 10,296$ 9,597 - Net present value $ 1,749.80