Concept to encompass surf lifestyle for the home

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Reference no: EM131059330

With the growing popularity of casual surf print clothing, two recent MBA graduates decided to broaden this casual surf concept to encompass a "surf lifestyle for the home." With limited capital, they decide to focus on surf print table and floor lamps to accent people's homes. They project unit sales of these lamps to be 7,000 in the first year, with growth of 8% each year for the next five years. Production of these lamps will require $35,000 in net working capital to start. Total fixed costs are $95,000 per year, variable production costs are $20 per unit, and the units are priced at $48 each. The equipment needed to begin production will cost $175,000. The equipment will be depreciated using the 5 year MACRS life and is expected to have a salvage value of $25,000 after six years. The effective tax rate is 34 percent, and the required rate of return is 25%. What is the PV of this project?

Reference no: EM131059330

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