Burress Beverages is considering a project where they would open a new facility in Seattle, Washington. The company’s CFO has assembled the following information regarding the proposed project:
· It would cost $500,000 today (at t = 0) to construct the new facility. The cost of the facility will be depreciated on a straight-line basis over five years.
· If the company opens the facility, it will need to increase its inventory by $100,000 at t = 0. $70,000 of this inventory will be financed with accounts payable.
· The CFO has estimated that the project will generate the following amount of revenue over the next three years:
Year 1 Revenue = $1.0 million
Year 2 Revenue = $1.2 million
Year 3 Revenue = $1.5 million
· Operating costs excluding depreciation equal 70% of revenue.
· The company plans to abandon the facility after three years. At t = 3, the project’s estimated salvage value will be $200,000. At t = 3, the company will also recover the net operating working capital investment that it made at t = 0.
· The project’s cost of capital is 14%.
· The company’s tax rate is 40%.
What is the project’s net present value (NPV)?
WHY SHOULD YOU HIRE EXPERT ACADEMIC WRITERS?
Answering this question is not essay as it seems. It will require you to research or burn your brain power, write your findings down, edit, proofread severally, and submit unsure of the grade you will get. Classaider.com assignment writers are offering to take care of that. Order your assignment now, relax, submit, and enjoy excellent grades. We guarantee you 100% original answers, timely delivery, and some free products.