A company sells Widgets to consumers at a price of $83 per unit. The cost to...

70.2K

Verified Solution

Question

Finance

A company sells Widgets to consumers at a price of $83 per unit.The cost to produce Widgets is $30 per unit. The company will sell15,000 Widgets to consumers each year. The fixed costs incurredeach year will be $220,000. There is an initial investment toproduce the goods of $2,700,000 which will be depreciated straightline over the 17 year life of the investment to a salvage value of$0. The opportunity cost of capital is 13% and the tax rate is 37%.Operating cash flow is $421,014.71. NPV is $133047.13.
What is the NPV of the project if inventories must be increasedat the start of the project (year 0) by $400,000 and will berecovered at the end (year 17). Answer is -216,865.71. Please showdetails calculation how to get the answer is -216,865.71. Dont usethe excel!!!! Thank you !!!!

Answer & Explanation Solved by verified expert

4.3 Ratings (634 Votes)

NO EXCEL FUNCTION IS USED JUST See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

A company sells Widgets to consumers at a price of $83 per unit.The cost to produce Widgets is $30 per unit. The company will sell15,000 Widgets to consumers each year. The fixed costs incurredeach year will be $220,000. There is an initial investment toproduce the goods of $2,700,000 which will be depreciated straightline over the 17 year life of the investment to a salvage value of$0. The opportunity cost of capital is 13% and the tax rate is 37%.Operating cash flow is $421,014.71. NPV is $133047.13.What is the NPV of the project if inventories must be increasedat the start of the project (year 0) by $400,000 and will berecovered at the end (year 17). Answer is -216,865.71. Please showdetails calculation how to get the answer is -216,865.71. Dont usethe excel!!!! Thank you !!!!