Question: A three-year project will require $589,000 for fixed assets, $79,000 for inventory, and $43,000 for accounts receivable. Accounts payable are expected to increase by $47,000.
A three-year project will require $589,000 for fixed assets, $79,000 for inventory, and $43,000 for accounts receivable. Accounts payable are expected to increase by $47,000. The fixed assets will be depreciated straight-line to a zero book value over five years. No bonus depreciation will be taken. At the end of the project, the fixed assets can be sold for $225,000. The net working capital returns to its original level at the end of the project. It is expected that 1980 cameras will be sold each year at a unit price of $91.40 and at a cost of $30 per unit. No new debt is required. The tax rate is 21.009% and the discount rate is 12%. Should the project be accepted?
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