the net working capital requirement including the initial working capital needed in 544062 | Homework Solutions

Project Evaluation. Fireplaces Etc. is about to launch a new range of wood stoves, priced at $ 110 per unit. The unit cost of the wood stoves is $65. The firm expects to sell the wood stoves over the next five years. The venture will require an initial investment in plant and equipment of$25,000. Assume that the investment will be in an asset class with a CCA rate of 15 percent. At the end office years, the plant and equipment will have a zero salvage value but Fireplaces Etc. will continue 10 have other assets in this asset class. Sales projections for the wood stoves arc as follows:

The net working capital requirement (including the initial working capital needed in Year 0) is expected to be20 percent of the following year”s sales. The firm”s tax rate is 35 percent. Using a discount rate of 15 percent, calculate the net present value of the project.