What is the projects expected npv


Desai Industries is analyzing an average-risk project, and the following data have been developed.  Unit sales will be constant, but the sales price should increase with inflation.  Fixed costs will also be constant, but variable costs should rise with inflation. The project should last for 3 years, it will be depreciated on a straight-line basis, and there will be no salvage value. This is just one of many projects for the firm, so any losses can be used to offset gains on other firm projects.  What is the project's expected NPV?

WACC

10.0%

Net investment cost (depreciable basis)

$200,000

Units sold

50,000

Average price per unit, Year 1

$25.00

Fixed op. cost excl. deprec. (constant)

$150,000

Variable op. cost/unit, Year 1

$20.20

Annual depreciation rate

33.333%

Expected inflation rate per year

5.00%

Tax rate

40.0%

a. $15,925
b. $16,764
c. $17,646
d. $18,528
e. $19,455

Request for Solution File

Ask an Expert for Answer!!
Finance Basics: What is the projects expected npv
Reference No:- TGS0550184

Expected delivery within 24 Hours