What is the npv

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The newest ambitious project from Tesla is the all-electric Model Y compact crossover. After spending $3 million on research, Tesla has developed the new model. The project requires an initial investment in plant and equipment of $12 million. This investment will be depreciated straight-line over three years to a value of zero, but when the project comes to an end in three years, the equipment can, in fact, be sold for $500,000. Accepting this project will reduce the unit sales of Model X by 1000 units per year, the sale price of Model X is $40,000. The firm believes that working capital at each date must be maintained at 10% of next year's forecasted sales. Production costs are estimated 60% sale price and Model Y's expected sales is $48000. Sales forecasts are given in the following table. The firm pays tax at 35% and the required return on the project is 12%. What is the NPV?

Year 0 1 2 3 Sales in thousands 0 100 80 40

Reference no: EM132386200

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