Transcribed Image Text
Desai Industries is analyzing an average-risk project, and thefollowing data have been developed. Unit sales will be constant,but the sales price should increase with inflation. Fixed costswill also be constant, but variable costs should rise withinflation. The project should last for 3 years, it will bedepreciated on a straight-line basis, and there will be no salvagevalue. No change in net operating working capital would berequired. This is just one of many projects for the firm, so anylosses on this project can be used to offset gains on other firmprojects. What is the project's expected NPV? Donot round the intermediate calculations and round the final answerto the nearest whole number.WACC10.0%Net investment cost (depreciable basis)$200,000Units sold58,000Average price per unit, Year 1$25.00Fixed op. cost excl. depr. (constant)$150,000Variable op. cost/unit, Year 1$20.20Annual depreciation rate33.333%Expected inflation rate per year5.00%Tax rate40.0%a.$66,796b.$75,339c.$92,426d.$77,669e.$61,359If you can explain the steps for inflation portion, it would beappreciated. Thanks