Company is considering a project producing a new product, and the project will last for 10 years. The company expects to sell 10,000 units in the first year then increasing by 4% each year. the selling price for the product will be $100 per unit at the first year, then reducing by 3% each year. The variable cost is $50 per unit at the first year, increasing by 2% each year. The fixed cost is $320,000 at the first year, increasing by 3% each year. Assume all the above cash flows occur at the end of the year. The initial investment is $3,000,00 and there will be no salvage value at the end of year 10. the tax rate is 30% and the cost of capital is 12%. The initial outlay will be depreciated by using the straight-line method. A. compute the NPV of this project.
Company is considering a project producing a new product, and the project will last for 10 years. The company expects to sell 10,000 units in the first year then increasing by 4% each year. the selling price for the product will be $100 per unit at the first year, then reducing by 3% each year. The variable cost is $50 per unit at the first year, increasing by 2% each year. The fixed cost is $320,000 at the first year, increasing by 3% each year. Assume all the above cash flows occur at the end of the year. The initial investment is $3,000,00 and there will be no salvage value at the end of year 10. the tax rate is 30% and the cost of capital is 12%. The initial outlay will be depreciated by using the straight-line method. A. compute the NPV of this project.
Step by step
Solved in 2 steps
