acb2n4
Oct 22, 2009, 12:31 PM
Can someone help me with this problem??
You've already spent $300,000 designing and making models of your "Folding Car." Now you are trying to convince people to fund the manufacturing process. You believe start-up costs will be $3,000,000 and will be depreciated straight-line over the five year life to zero salvage value. (= Nothing weird goin on in year 5). The problem is it will take two years to get through all the start up problems and actually produce a car. So in the four remaining years, you have normal operations and expect to sell 400 cars/year at $15,000. Cost of producing each of these cars is $8,000. Taxes are 34% and the cost of capital is 10%. What is the closest to the NPV of this project?
You've already spent $300,000 designing and making models of your "Folding Car." Now you are trying to convince people to fund the manufacturing process. You believe start-up costs will be $3,000,000 and will be depreciated straight-line over the five year life to zero salvage value. (= Nothing weird goin on in year 5). The problem is it will take two years to get through all the start up problems and actually produce a car. So in the four remaining years, you have normal operations and expect to sell 400 cars/year at $15,000. Cost of producing each of these cars is $8,000. Taxes are 34% and the cost of capital is 10%. What is the closest to the NPV of this project?