Golden Gelt Giftware - 70942

Solution Posted by
bestwritter

bestwritter

Rating : (2)F
Solution Detail
Price: $25.00
  • From: Business,
  • Posted on: Sun 03 Aug, 2014
  • Request id: None
  • Purchased: 0 time(s)
  • Average Rating: No rating
Request Description

 

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.)

Solution Description

Best Answer

Attachments
Golden Gelt Giftware Solution.xlsx
Golden Gelt Gif...