question archive Atlantic Manufacturing is considering a new investment project that will last for four years
Atlantic Manufacturing is considering a new investment project that will last for four years
Subject:FinancePrice:2.87 Bought7
Atlantic Manufacturing is considering a new investment project that will last for four years. The delivered and installed cost of the machine needed for the project is $22,522 and it will be depreciated according to the three-year MACRS schedule. The project also requires an initial increase in net working capital of $294. Financial projections for sales and costs are in the table below. In addition, since sales are expected to fluctuate, NWC requirements will also fluctuate. The end-of-year NWC requirements are included below (hint: these NWC capital requirements DO NOT represent the change in NWC for the period). The $0 requirement for NWC at the end of year 4 means that all NWC is recovered by the end of the project. The corporate tax rate is 35% and the required return on the project is 12%.
|
Year |
1 |
2 |
3 |
4 |
|
Sales |
$11,970 |
$12,805 |
$13,673 |
$10,344 |
|
Costs |
2,332 |
2,936 |
3,292 |
1,188 |
|
NWC Requirements |
330 |
359 |
232 |
0 |
What is the project’s NPV? (Round answer to 2 decimal places. Do not round intermediate calculations).
