1. 18 pts] Bas det ed on a recent market study which cost $50,000, a firm intend

Question

1. 18 pts] Bas det ed on a recent market study which cost $50,000, a firm intends to ector system in order to eliminate cockroaches. The expected sales ar three years ate cockroaches. The expected sales are the following for the next new laser Year Units Sold 1 53,000 3 46,000 equal to 20% of the total salesofthe firm for the following years xceptfor the last year (t=3) where 2 86,000 The sales price of the in net working e new system is estimated at $95 per unit. This new project will require an increase capital (NWC) of $10,000 at the launch of the project (t-0), and the NWC will then be ( l be zero. The variable cost per unit is estimated at $60 and there are annual 25,000. This project requires an initial investment (machine) of $2,500,000 n a linear basis over 5 years. At the end of the he purchase price. which can be depreciated project in year 3, The company's income and capital gains are taxed at a rate of 40%, and the the machine can be sold for 30% of d rate of return by investors is 20%. Compute the NP l ofthe project.

Explanation / Answer

Market Study                50,000 Already happened so irrelavent cost Project is not viable as NPV

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