# Traid Winds Corporation: project NPV for new project

Traid Winds Corporation, a firm in the 34% marginal tax bracket with a 15% required rate of return, is considering a new project. This project involves the introduction of a new product. This project is expected to be terminated at the end of 5 years because the product is somewhat of a fad.

Using the provided "Triad Winds xls" and the following information, determine the:

Project NPV using sum of individual annual PV calculations

Project NPV using EXCEL NPV formula

Project IRR using EXCEL IRR formula

Project Data:

Cost of new plant and equipment (P&E): $14,800,000

Shipping and installation costs: $200,000

Unit Sales Year Units Sold

1 70,000

2 120,000

3 120,000

4 80,000

5 70,000

Sales price per unit: $300 / unit in years 1 thru 4; $250 / unit in year 5

Variable cost per unit: $140 / unit

Annual Fixed Costs: $700,000

Working Capital Requirements:

There will be an initial working capital requirement of $200,000 just to get production started. For each year, the total investment in working capital will be equal to 10% of the dollar value of sales for that year. Thus, the investment in working capital will increase during years 1 thru 3, then decrease in year 4. Finally, all working capital will be ʽliquidatedʼ (reclaimed) at the termination of the project at the end of year 5.

Depreciation Method:

Use the simplified straight-line method over 5 years. It is assumed that the plant & equipment will have no salvage after 5 years.

https://brainmass.com/business/capital-budgeting/traid-winds-corporation-project-npv-for-new-project-204104