Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.93 million. The marketing department predicts that sales related to the project will be $2.63 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 30 percent of sales. The company also needs to add net working capital of $280,000 immediately. The additional net working capital will be recovered in full at the end of the project's life. The corporate tax rate is 23 percent. The required rate of return is 13 percent. What is the NPV for this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)

Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.93 million. The marketing department predicts that sales related to the project will be $2.63 million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its four-year economic life using the straight-line method. Cost of goods sold and operating expenses related to the project are predicted to be 30 percent of sales. The company also needs to add net working capital of $280,000 immediately. The additional net working capital will be recovered in full at the end of the project's life. The corporate tax rate is 23 percent. The required rate of return is 13 percent. What is the NPV for this project? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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