Finding the net present value in given case

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Reference no: EM132013845

Question: A new factory at Arcata requires an initial outlay of $3.85 million to be paid immediately. The factory will last for eight additional years, after which it can be sold for a salvage value of $2,400,000. Sales will be $800,000 during the first year of operation and will grow at a rate of 9 percent a year after that. Variable costs will be 30 percent of sales and fixed costs will be $150,000 and grow at a rate of 5% per year. All costs are in cash. Assume cash flows occur at year-end. At a 6 percent required return. (Ignore taxes) The net present value of this project and is __________.

Reference no: EM132013845

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