# Golden Gelt Giftware - 70942

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## bestwritter

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• Posted on: Sun 03 Aug, 2014
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The following table presents sales forecasts for Golden Gelt Giftware. The unit price is \$45. The unit cost of the giftware is \$30.

Year Unit Sales

1 42,000

2 48,000

3 19,000

4 9,000

Thereafter 0

It is expected that net working capital will amount to 20% of sales in the following year. For example, the store will need an initial (year-0) investment in working capital of .20 × 42,000 × \$45 = \$378,000. Plant and equipment necessary to establish the Giftware business will require an additional investment of \$220,000. This investment will be depreciated using MACRS and a 3-year life. After 4 years, the equipment will have an economic and book value of zero. The firm’s tax rate is 20%. What is the net present value of the project? The discount rate is 12%. (Do not round intermediate calculations. Round your answer to the nearest dollar amount.)

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