Reference no: EM132700951

A company will sell Gizmos to consumers at a price of $84 per unit. The variable cost to produce Gizmos is $44 per unit. The company expects to sell 16,000 Gizmos to consumers each year. The fixed costs incurred each year will be $130,000. There is an initial investment to produce the goods of $2,900,000 which will be depreciated straight line over the 17 year life of the investment to a salvage value of $0. The opportunity cost of capital is 9% and the tax rate is 25%. Using the an annual operating cash flow of $425,147.06, the project ignoring changes net working capital of $732,299.76 What is the net present value of the project if inventories must be increased at the start of the project (year 0) by $950,000 and will be recovered at the end (year 17)?