Answered: what is the project's NPV? Options

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 2PB: Markoff Products is considering two competing projects, but only one will be selected. Project A...

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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 expected-scenario forecast, the annual sales volume is 37,200 units, while the sale price is $101 per unit with a variable cost of $51 per unit. Annual fixed costs are estimated to $870,000. If the appropriate discount rate is 10.50% and the tax rate 30%, what is the project's NPV?

Options

	$1,645,642
	$1,690,119
	$1,734,595
	$1,779,072
	$1,823,549

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