The Bruin's Den Outdoor Gear is considering a new 7-year project to produce a new tent line. The equipment necessary would cost $1.95 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 30,500 tents per year at a price of $78 and variable costs of $37 per tent. The fixed costs will be $535,000 per year. The project will require an initial investment in net working capital of $249,000 that will be recovered at the end of the project. The required rate of return is 12.1 percent and the tax rate is 21 percent. What is the NPV? Multiple Choice $750,550 $991, 492 $882, 038 $854, 426 $1,103,426

The Bruin's Den Outdoor Gear is considering a new 7-year project to produce a new tent line. The equipment necessary would cost $1.95 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 30,500 tents per year at a price of $78 and variable costs of $37 per tent. The fixed costs will be $535,000 per year. The project will require an initial investment in net working capital of $249,000 that will be recovered at the end of the project. The required rate of return is 12.1 percent and the tax rate is 21 percent. What is the NPV? Multiple Choice $750,550 $991, 492 $882, 038 $854, 426 $1,103,426

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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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