Explore BrainMass

Explore BrainMass

    Net Present Value of project for Golden Gelt Giftware.

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Project evaluation: The following table presents sales forecasts for Golden Gelt Giftware. The unit price is $40.00. The unit cost of the giftware is $25.00.

    Year Unit Sales
    1 $22,000.00
    2 $30,000.00
    3 $14,000.00
    4 $5,000.00
    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 x 22,000 x $40= $176,000.00. Plant and equipment necessary to establish the Giftware business will require an additional investment of $200,000.00. This investment will be depreciated using MARCS and a 3 year life. After 4 years, the equipment will have an economic and book value of 0. The firm's tax rate is 35%.

    What is the net present value of the project? The discount rate is 20%.

    Please show all work.

    © BrainMass Inc. brainmass.com March 4, 2021, 6:23 pm ad1c9bdddf
    https://brainmass.com/business/net-present-value/net-present-value-of-project-for-golden-gelt-giftware-42669

    Solution Preview

    See attached file.

    NPV is $212,021.48. I have made an Excel spreadsheet available for you that shows the calculations.

    Unit Price $40
    Unit Cost $25 ...

    Solution Summary

    In Excel, the solution is clearly calculated.

    $2.49

    ADVERTISEMENT