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Bennington Golf has developed a new laser range finder. The company has projected sales of 14,900, 17,600, 19,200, 21,400, and 15,300 units per year over the next five years, respectively. Equipment necessary for production will cost $3.4 million today and will be depreciated on a three-year MACRS schedule over the life of the project. The equipment can be sold for $275,000 at the end of the project’s life. The price and variable costs per unit in today’s dollars are $118 and $47, respectively. Fixed costs are $625,000 per year when expressed in today’s dollars. The nominal required return is 9.3 percent. The price per unit, variable cost per unit, and fixed costs are all expected to increase at the inflation rate of 3.2 percent. The company has a tax rate of 38 percent. What is the project’s NPV?

Financial Management, Finance

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