A product line can sell 100,000 products per year for 3 years (after which time this project is expected to shut down). The product will sell for $6 each, with variable costs of $1 for each one produced, while annual fixed costs associated with production will be $30,000. In addition, there will be a $325,000 initial expenditure associated with the purchase of new production equipment. It assumed that this initial expenditure will be depreciated using the SL method over 4 years. The before-tax salve is $25,000. This project will also require a one-time initial investment of $32,000 in net working capital associated with inventory. The required rate of return is 10%. Tax rate is 21%. What is the NPV?

Answer rating: 100% (QA)

To calculate the Net Present Value NPV we need to determine the cash flows associated with the project and discount them to their present value using ... View the full answer