Question

A company is considering a new project requiring an upfront fixed-asset investment of $1,000,000 with an...

A company is considering a new project requiring an upfront fixed-asset investment of $1,000,000 with an economic life of five years. Depreciation is taken on a straight-line basis, with no expected salvage value. Net working capital required immediately is expected to be $100,000 and will be recovered in full upon the project's completion in five years. In the optimistic-scenario forecast, the annual sales volume is 63,000 units, while the sale price is $162 per unit with a variable cost of $100 per unit. Annual fixed costs are estimated to $1,356,000. If the appropriate discount rate is 14.00% and the tax rate 30%, what is the project's NPV?

Question 2 options:

$5,021,673

$5,153,822

$5,285,971

$5,418,121

$5,550,270

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Answer #1

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