After spending $ 9800 on client-development, you have just been offered a big production contract by a new client. The contract will add $ 199000 to your revenues for each of the next five years and it will cost you $ 98000 per year to make the additional product. You will have to use some existing equipment and buy new equipment as well. The existing equipment is fully depreciated, but could be sold for $ 48000 now. If you use it in the project, it will be worthless at the end of the project. You will buy new equipment valued at $ 28000 and use the 5-year MACRS schedule to depreciate it. It will be worthless at the end of the project. Your current production manager earns $ 83000 per year. Since she is busy with ongoing projects, you are planning to hire an assistant at $ 43000 per year to help with the expansion. You will have to immediately increase your inventory from $ 20000 to $ 30000. It will return to $ 20000 at the end of the project. Your company's tax rate is 35 % and your discount rate is 15.4 %. What is the NPV of the contract?

Note: Assume that the equipment is put into use in year 1.

complete table from year 0 through year 6

Calculate the NPV

Year 0 GA SA A Sales - Cost of Goods Sold Gross Profit - Annual Cost - Depreciation EBIT - Tax Incremental Earnings + Depreciation - Incremental Working Capital GA Enter any number in the edit fields and then click Check Answ 7 parts remaining Type here to search Gross Profit 69 - Annual Cost 69 6 - Depreciation EBIT 6 - Tax 6 6 6 Incremental Earnings + Depreciation - Incremental Working Capital - Opportunity Cost - Capital Investment Incremental Free Cash Flow 69 0 Enter any number in the edit fields and then click Check Ans