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Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $500,000 and will be eligible for 100 percent bonus depreciation. The equipment can be sold for $90,000 at the end of the project in 5 years. Sales would be $335,000 per year, with annual fixed costs of $62,000 and variable costs equal to 37 percent of sales. The project would require an investment of $55,000 in NWC that would be returned at the end of the project. The tax rate is 25 percent and the required return is 10 percent.   Calculate the NPV of this project.

Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $500,000 and will be eligible for 100 percent bonus depreciation. The equipment can be sold for $90,000 at the end of the project in 5 years. Sales would be $335,000 per year, with annual fixed costs of $62,000 and variable costs equal to 37 percent of sales. The project would require an investment of $55,000 in NWC that would be returned at the end of the project. The tax rate is 25 percent and the required return is 10 percent.   Calculate the NPV of this 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 4P
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Eggz, Inc., is considering the purchase of new equipment that will allow the company to collect loose hen feathers for sale. The equipment will cost $500,000 and will be eligible for 100 percent bonus depreciation. The equipment can be sold for $90,000 at the end of the project in 5 years. Sales would be $335,000 per year, with annual fixed costs of $62,000 and variable costs equal to 37 percent of sales. The project would require an investment of $55,000 in NWC that would be returned at the end of the project. The tax rate is 25 percent and the required return is 10 percent.

 

Calculate the NPV of this project. 
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