# NVP for a company, homework help- COURSE FIGHTER | coursefighter.com

NVP for a company, homework help- COURSE FIGHTER | coursefighter.com

A company is considering making a new bicycle. The company expects to sell 4,000 units of the bicycle each year for 5 years. Each bicycle is expected to sell for \$400. The company’s tax rate is 30%. Fixed costs are \$700,000 per year, and variable costs are \$75 per bicycle.

To make the bicycle, the company will purchase a machine that costs \$1.5 million today. The machine will be depreciated with straight-line depreciation over a 5-year period. The machine will be sold for \$50,000 when this project ends in 5 years.

The net working capital requirements are \$150,000 at Year 0, which are expected to be recovered in full in Year 5. The required rate of return for the project is 12%.

Complete the following with this information:

• Estimate the project’s cash flows
• Estimate the project’s net present value (NPV)
• Determine if the project should be accepted or not

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