Question

Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $975,000, and its economic life is five years. The machine will be fully depreciated by the straight-line method. The machine will produce 20,000 keyboards each year. The price of each keyboard will be $40 in the first year and will increase by 5 percent per year. The production cost per keyboard will be $15 in the first year and will increase by 6 percent per year. The project will have an annual fixed cost of $195,000 and require an immediate investment of $25,000 in net working capital. The corporate tax rate for the company is 34 percent. If the appropriate discount rate is 11 percent, what is the NPV of the investment?



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  • CreatedAugust 28, 2014
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