Question: BE (This information will be used for problems 27-33) Silvio's Sausage Factory has come up with a new line of spicy sausages. Silvio has already
BE (This information will be used for problems 27-33) Silvio's Sausage Factory has come up with a new line of spicy sausages. Silvio has already paid $75,000 for a marketing study to determine the viability of the product. It is believed that the new line. of sausages will generate sales for each year of: Year 1 $625,000; Year 2 $650,000; Year 3 $700,000; and Year 4 $750,000. The fixed costs associated with the product will be $315,000 per year, and variable costs will amount to 22% of sales. The equipment necessary for production of the new sausages will cost $596,000 and will be a depreciated to zero using straight line depreciation over four years. At the end of the four years Silvio believes the equipment will have a salvage value of $45,000. Silvio's Sausage paid 35% in taxes last year and has a required rate of return of 13%. No additional working capital is required. What is the NPV of the project? O-$32,220 $60,309 O $28,911 O $103,911 O-$14,280
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