Reference no: EM132499790
Nottingham Circus, a polythene bag manufacturing company has employed your services as an investment advisor to evaluate financial viability of a proposed project on production of reusable shopping bags. The equipment being targeted for use would cost $950,000, excluding $122,000 installation fees. Annual sales would be 14,500 units at a price of $62.00 per bag, and the project's life would be 6 years. At the end of 6 years, the equipment could be sold for $140,000. Depreciation would be based on the MACRS 6-year class; so the applicable rates would be 10%, 18%, 23%, 24%, 12% and 7%. Variable costs would be 55% of sales revenue, fixed costs excluding depreciation would be $120,000 per year, the marginal tax rate is 35%, and the corporate weighted average cost of capital is 14%. Current assets and liabilities are expected to increase with the proposed new investment.
Specifically, prepaid expenses are expected to increase by $15,000, wages payable $17,000, account payable $23,000, receivables $48,500, inventory $21,500 and current maturities of long-term debt $33,000.
Determine the NPV
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Determine the npv-nottingham circus
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Determine npv-nottingham circus
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