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Bourque Enterprises is considering a new project. The project will generate sales of $1.6 million, $2.3 million, $2.2 million, and $1.7 million over the next four years, respectively. The fixed assets required for the project will cost $2.1 million and will be eligible for 100 percent bonus depreciation. At the end of the project, the fixed assets can be sold for $165,000. Variable costs will be 25 percent of sales and fixed costs will be $540,000 per year. The project will require NWC equal to 20 percent of sales that must be accumulated in the year prior to sales. The required return on the project is 13 and the tax rate is 24 percent. What is the NPV of the project?

Bourque Enterprises is considering a new project. The project will generate sales of $1.6 million, $2.3 million, $2.2 million, and $1.7 million over the next four years, respectively. The fixed assets required for the project will cost $2.1 million and will be eligible for 100 percent bonus depreciation. At the end of the project, the fixed assets can be sold for $165,000. Variable costs will be 25 percent of sales and fixed costs will be $540,000 per year. The project will require NWC equal to 20 percent of sales that must be accumulated in the year prior to sales. The required return on the project is 13 and the tax rate is 24 percent. What is the NPV of the project?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 17P
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Bourque Enterprises is considering a new project. The project will generate sales of $1.6 million, $2.3 million, $2.2 million, and $1.7 million over the next four years, respectively. The fixed assets required for the project will cost $2.1 million and will be eligible for 100 percent bonus depreciation. At the end of the project, the fixed assets can be sold for $165,000. Variable costs will be 25 percent of sales and fixed costs will be $540,000 per year. The project will require NWC equal to 20 percent of sales that must be accumulated in the year prior to sales. The required return on the project is 13 and the tax rate is 24 percent.

What is the NPV of the project?

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