You are thinking about buying a printing press today that will print t-shirts for many years...

Transcribed Image Text:

You are thinking about buying a printing press today that will print t-shirts for many years including the celebration of a DePaul Women's Soccer National Championship. The machine will cost $5mm to buy and $1mm to install. For working capital, assume that you must have an increase in accounts receivable of $2mm, an inventory increase of $1mm and an accounts payable increase of $1mm. You will use the machine for regular printing jobs; these jobs will produce $3mm of positive after-tax cash flow per year (assume the cash flows start after one year and end after 25 total years). The victory will produce a special one time extra after-tax cash flow of $5.24mm in 2030 because of the National Championship. Your WACC is 13%. Your tax rate is 25%. At the end of 25 years, you shut down (and sell) the machine for $3mm and liquidate the working capital. Assume the machine had been depreciated to a tax value of $1mm. What is the NPV of the project? You are thinking about buying a printing press today that will print t-shirts for many years including the celebration of a DePaul Women's Soccer National Championship. The machine will cost $5mm to buy and $1mm to install. For working capital, assume that you must have an increase in accounts receivable of $2mm, an inventory increase of $1mm and an accounts payable increase of $1mm. You will use the machine for regular printing jobs; these jobs will produce $3mm of positive after-tax cash flow per year (assume the cash flows start after one year and end after 25 total years). The victory will produce a special one time extra after-tax cash flow of $5.24mm in 2030 because of the National Championship. Your WACC is 13%. Your tax rate is 25%. At the end of 25 years, you shut down (and sell) the machine for $3mm and liquidate the working capital. Assume the machine had been depreciated to a tax value of $1mm. What is the NPV of the project?

Answer rating: 100% (QA)

The Net Present Value NPV of the project involving the purchase of a printing press for tshirt print... View the full answer