Firm is trying to decide whether to produce new product

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Reference no: EM13919381

A firm is trying to decide whether to produce a new product. In order to produce this product, the firm would have to invest $4,906,000 in machinery and $490,600 in net working capital. The machinery would be depreciated using the 5-year depreciation table below. After 4 years the project would be terminated. At this time the $490,600 in net working capital would be recovered and the machinery would be sold for $343,420. Sales are expected to be $1,030,260 per year; annual cash operating expenses will be $392,480 for the 4 years of this project. The tax rate is 31% and the cost of capital is 10%. Find the net present value of this project.

Reference no: EM13919381

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