Popeye Industries, Inc. is considering a new spinach dinner product line that would require an...
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Popeye Industries, Inc. is considering a new spinach dinner product line that would require an initial investment of $3.5 million and have a useful life of 5 years. The initial investment would be depreciated according to the 5-year MACRS class. The price of each dinner is expected to be $5 in real 2016 dollars. The variable cost per dinner is expected to be $3 in real 2016 dollars. There are no other fixed costs for this new product line. Unit sales (number of dinners sold) over the next five years are expected to be as follows: Inflation is expected to be 4% per year for all goods. The salvage price of the equipment for the project is expected to be S_s=$500,000. If Popeye's nominal WACC for this project is 15% and its tax rate is 35%, calculate the NPV of the proposed project
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