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# Net Present Value of project for Golden Gelt Giftware.

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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%.

#### 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