SSS is considering whether to become a distributor for a new line of frozen yogurt. Undertaking this project would require an initial cash outlay of $300,000 to buy a refrigerated storage unit, and an investment in working capital (for inventory)of $10,000. The storage unit would be depreciated using the 7 year MACRS schedule below. SSS plan to terminate this project after 5 years. It is estimated that they can sell the storage unit for $50,000 at that time. SSS estimates the Frozen Yogurt's sales would be $150,000 each year and the operating expenses to be $80,000 per year. SSS's marginal tax rate is 30%. The cost of capital is 15%. Find the NPV of this project.

Answer rating: 100% (QA)

NPV of the project is 6973791 Formula sheet A1 G K L M 2 3 To calculate NPV of the project free cash ... View the full answer