With the growing popularity of casual surf print clothing, two recent MBA graduates decided to broaden...

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With the growing popularity of casual surf print clothing, tworecent MBA graduates decided to broaden this casual surf concept toencompass a “surf lifestyle for the home.” With limited capital,they decided to focus on surf print table and floor lamps to accentpeople’s homes. They projected unit sales of these lamps to be7,700 in the first year, with growth of 6 percent each year for thefollowing four years (Years 2 through 5). Production of these lampswill require $42,000 in networking capital to start. Total fixedcosts are $102,000 per year, variable production costs are $20 perunit, and the units are priced at $48 each. The equipment needed tobegin production will cost $182,000. The equipment will bedepreciated using the straight-line method over a five-year lifeand is not expected to have a salvage value. The effective tax rateis 40 percent, and the required rate of return is 22 percent. Whatis the NPV of this project? (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g.,32.16.)
What is the NPV?

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NPV PV of cash Inflows PV of cash Out See Answer

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With the growing popularity of casual surf print clothing, tworecent MBA graduates decided to broaden this casual surf concept toencompass a “surf lifestyle for the home.” With limited capital,they decided to focus on surf print table and floor lamps to accentpeople’s homes. They projected unit sales of these lamps to be7,700 in the first year, with growth of 6 percent each year for thefollowing four years (Years 2 through 5). Production of these lampswill require $42,000 in networking capital to start. Total fixedcosts are $102,000 per year, variable production costs are $20 perunit, and the units are priced at $48 each. The equipment needed tobegin production will cost $182,000. The equipment will bedepreciated using the straight-line method over a five-year lifeand is not expected to have a salvage value. The effective tax rateis 40 percent, and the required rate of return is 22 percent. Whatis the NPV of this project? (Do not round intermediatecalculations and round your answer to 2 decimal places, e.g.,32.16.)What is the NPV?