Question: Sway's Back Store is considering a project which will require the purchase of $1 million in new equipment. The equipment will be depreciated straight-line to
Sway's Back Store is considering a project which will require the purchase of $1 million in new equipment. The equipment will be depreciated straight-line to $200,000 over the 5-year life of the project. The first-year sale from this project is estimated at $800,000, then it keeps growing at a 5% rate. The variable cost is always 50% of the annual sales and there is an annual fixed cost of $100,000. Sway's Back Store will sell the equipment at the end of the project at a market value of $240,000. The net working capital for the project equals to 10% of sales across years. All of the net working capital will be recouped at the end of the project. The firm desires a minimal 10% rate of return on this project. The tax rate is 40%. Please calculate the NPV for this project
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