Problem 9-34 Project Evaluation (LO4)

The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40. The unit cost of the giftware is $20.

Year	Unit Sales
1	30,000
2	38,000
3	12,000
4	6,000
Thereafter	0

It is expected that net working capital will amount to 30% of sales in the following year. For example, the store will need an initial (Year 0) investment in working capital of .30 30,000 $40 = $360,000. Plant and equipment necessary to establish the giftware business will require an additional investment of $208,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firms tax rate is 21%. What is the net present value of the project? The discount rate is 15%. Use the MACRS depreciation schedule. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)