What is the npv of the? contract

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Reference no: EM131591239

After spending $10,000 on? client-development, you have just been offered a big production contract by a new client. The contract will add $200,000 to your revenues for each of the next five years and it will cost you $100,000 per year to make the additional product. You will have to use some existing equipment and buy new equipment as well. The existing equipment is fully? depreciated, but could be sold for

$50,000 now. If you use it in the? project, it will be worthless at the end of the project. You will buy new equipment valued at $30,000 and use the? 5-year MACRS schedule to depreciate it. It will be worthless at the end of the project. Your current production manager earns $80,000 per year. Since she is busy with ongoing? projects, you are planning to hire an assistant at $40,000 per year to help with the expansion. You will have to immediately increase your inventory from $20,000 to $30,000. It will return to $20,000 at the end of the project. Your? company's tax rate is 35% and your discount rate is 14.6%.

What is the NPV of the? contract?

Reference no: EM131591239

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