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You and a friend founded a t-shirt company while in college. At first, you just...

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Finance

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You and a friend founded a t-shirt company while in college. At first, you just wanted to print t-shirts for a couple of events on campus. To your surprise, you were pretty successful and generated at nice profit. What the two of you would like to do is to expand production to include a nicer line of collared shirts. Expansion looks attractive, but it will be costly. Below is information on the potential expansion. Given this information, what is the project's NPV? Cost of new equipment: $80,000 Installation cost of equipment: $40,000 o Life of equipment: 5 years, Straight line depreciation o Expected sales: S170,000 per year o Expected reduction in sales of cheap T-shirts as your few sober customers will probably shift to the new line: $10,000 per year O Raw material cost: $90,000 per year New worker salary: $20,000 per year O Required Networking capital over the life of the project: $20,000 Expected Salvage value of equipment at the end of 5 year: $30,000 Tax rate: 35% Assuming a WACC of 18%, what is this project's NPV? a. -1,068 b. 5.167 C. 12,725 d. 14,742 e. 19,391

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