Problem $9-34$ Project Evaluation $($LO$4)$

The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $$40.$ The unit cost of the giftware is $$25.$

Year Unit Sales

$123,400$

$237,000$

$321,000$

$45,000$

Thereafter $0$

It is expected that net working capital will amount to $20\%$ of sales in the following year. For example, the store will need an initial $($Year $0)$ investment in working capital of $\mathrm{.}20\backslash$times $23,400\backslash$times $$40=$ $$187,200.$ Plant and equipment necessary to establish the giftware business will require an additional investment of $$235,000.$ This investment will depreciate on the MACRS schedule over $3$ years. After $4$ years, the equipment will have an economic and book value of zero. The firm$$s tax rate is $30\%.$ The discount rate is $20\%.$ Use the MACRS depreciation schedule.

a$.$ What is the net present value of the project?

Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.Notes:

Tax depreciation is lower in the first year because assets are assumed to be in services for $6$ months.

Real property is depreciation stright$-$line over $27\mathrm{.}5$ years for residential property and $39$ years for nonresidential property.