Case $-$ NPV Calculation

Assumptions $($Amounts in $ Thousands Unless Otherwise Indicated$)$

Initial Capital Expenditure $($Year $0)9,000$

Useful Life of Equipment $5$

Annual Depreciation $1,800$

Sales in Year $130,000$

Sales Growth Rate per Year through Year $66\%$

Sales Growth Rate in Year $7$ and beyond $2\%$

Free Cash Flow Growth Rate in Year $7$ and beyond $2\%$

Cost of Goods Sold $(\%$ of sales$)72\%$

Incremental SG&A Expense $$5,000$

Market Research Expense $$500$

Initial Net Working Capital $($Year $0)6,000$

Accounts Receivable $\%$ of Next Year Sales $($Year $1$ and beyond$)15\%$

Inventory $\%$ of Next Year COGS $($Year $1$ and beyond$)20\%$

Accounts Payable $\%$ of Next Year COGS $($Year $1$ and beyond$)15\%$

Interest Expense $1,000$

Tax Rate $30\%$

Cost of Capital $20\%$

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