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Business, 18.03.2021 01:10 jessicamcgoldri5625

After spending $10,000 on client development. you have just been offered a big production contract by a new client. The contract will add $20,0000 to your revenues for each of the next 5 years and it will cost you $100,000 per year to make the additional product. You will have to liquidate existing equipment and buy new equipment as well. The existing equipment is fully depreciated but could be sold for now. You will buy new equipment valued at $30,000 and use the 5-year MACRS schedule to depreciate it. It will be worthless at the end of the project. Your current production manager ears per year. Since she is busy with ongoing projects, you are planning to hire an assistant at 910.000 per year to help with the expansion. You will have to increase your inventory immediately from $20,000 to $30.000. It will return to $20,000 at the end of the project. Your company's tax rate is 35% and your discount rate is 15%. What is the NPV of the contract?

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