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QUESTION 13 The Bruin's Den Outdoor Gear is considering a new 6-year project to produce a new tent line. The equip necessary would cost $1.29 million and be depreciated using straight-line depreciation to a book value o end of the project, the equipment can be sold for 15 percent of its initial cost. The company believes that 23,500 tents per year at a price of $64 and variable costs of $25 per tent. The fixed costs will be $395,00 The project will require an initial investment in net working capital of $193,000 that will be recovered at th project. The required rate of return is 10.7 percent and the tax rate is 35 percent. What is the NPV?

QUESTION 13 The Bruin's Den Outdoor Gear is considering a new 6-year project to produce a new tent line. The equip necessary would cost $1.29 million and be depreciated using straight-line depreciation to a book value o end of the project, the equipment can be sold for 15 percent of its initial cost. The company believes that 23,500 tents per year at a price of $64 and variable costs of $25 per tent. The fixed costs will be $395,00 The project will require an initial investment in net working capital of $193,000 that will be recovered at th project. The required rate of return is 10.7 percent and the tax rate is 35 percent. What is the NPV?

EBK CFIN
EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter10: Project Cash Flows And Risk
Section: Chapter Questions
Problem 13PROB
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QUESTION 13 The Bruin's Den Outdoor Gear is considering a new 6-year project to produce a new tent line. The equipment necessary would cost $1.29 million and be depreciated using straight-line depreciation to a book value of zero. At the end of the project, the equipment can be sold for 15 percent of its initial cost. The company believes that it can sell 23,500 tents per year at a price of $64 and variable costs of $25 per tent. The fixed costs will be $395,000 per year. The project will require an initial investment in net working capital of $193,000 that will be recovered at the end of the project. The required rate of return is 10.7 percent and the tax rate is 35 percent. What is the NPV?
Transcribed Image Text:QUESTION 13 The Bruin's Den Outdoor Gear is considering a new 6-year project to produce a new tent line. The equipment necessary would cost $1.29 million and be depreciated using straight-line depreciation to a book value of zero. At the end of the project, the equipment can be sold for 15 percent of its initial cost. The company believes that it can sell 23,500 tents per year at a price of $64 and variable costs of $25 per tent. The fixed costs will be $395,000 per year. The project will require an initial investment in net working capital of $193,000 that will be recovered at the end of the project. The required rate of return is 10.7 percent and the tax rate is 35 percent. What is the NPV?
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