Explain what is the net present value of this project

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Reference no: EM132025332

Tech Enterprises is considering a new project that will require $325,000 for fixed assets, $160,000 for inventory, and $35,000 for accounts receivable. Shortterm debt is expected to increase by $100,000.

The project has a 5year life. The fixed assets will be depreciated straightline to a zero book value over the life of the project.

At the end of the project, the fixed assets can be sold for 25 percent of their original cost and the net working capital will return to its original level. The project is expected to generate annual sales of $554,000 and costs of $430,000.

The tax rate is 35 percent and the required rate of return is 15 percent. What is the net present value of this project?

Reference no: EM132025332

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