Reference no: EM132656457

As the finance manager of a company, you are presented with the following project. The company is considering the purchase of a new piece of equipment which would cost $210,000. This equipment will have a five-year useful life and have a salvage value of $10,000 at the end of the five-year period. Assume straight-line depreciation It is estimated that the new equipment will be able to produce 10,000 shelves per year. the allocated overhead for running the equipment will be $20,000 per year. they can sell the shelves for $25 each. the cost of sales is $15 per shelf. Net Working Capital requirements for the project are as follows: Year 0 = $10,000 Year 1 = $15,000 Year 2 = $17,000 Year 3 = $15,000 Year 4 = $10,000 The company has a 30% marginal tax rate and a required rate of return of 15%.

1.What is the NPV for the project?- Need confirmation that NPV is 16,204.

2. The company has a preexisting line ofshelves that sell for $25 per unit with a unit cost of $15. You estimate that sales forthis preexisting line will be 500 units lower each year (not cumulative) as long asthe new line of shelves is in production. What is the new NPV?