Solution-Cockroach search and destroy system

Cockroach search and destroy system

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Reference no: EM132564871

We project unit sales for a new household-use laser-guided cockroach search and destroy system as follows:

YearUnit Sales1100,0002112,0003135,0004141,000594,000

The new system will be priced to sell at $465 each.

The cockroach eradicator project will require $2,000,000 in net working capital to start, and total net working capital will rise to 15% of the change in sales. The variable cost per unit is $335, and total fixed costs are $2,300,000 per year. The equipment necessary to begin production will cost a total of $21 million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of 20%. In five years, this equipment will actually be worth about 20% of its cost.

The relevant tax rate is 35%, and the required return is 15%. Based on these preliminary estimates, what is the NPV of the project?

Reference no: EM132564871

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Cockroach search and destroy system

Reference no: EM132564871

Reference no: EM132564871

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