# Suppose a firm is considering the following project, where all of the dollar figures are in thousands of dollars.

Suppose a firm is considering the following project, where all of the dollar figures are in thousands of dollars. In year 0, the project requires \$37,500 investment in plant and equipment, is depreciated using the straight-line method over seven years, and there is a salvage value of \$5,600 in year 7. The project is forecast to generate sales of 5,700 units in year 1, rising to 24,100 units in year 5, declining to 8,200 units in year 7, and dropping to zero in year 8. The inflation rate is forecast to be 1.5% in year 1, rising to 2.8% in year 5, and then leveling off. The real cost of capital is forecast to be 9.3% in year 1, rising to 10.6% in year 7. The tax rate is forecast to be a constant 42.0%. Sales revenue per unit is forecast to be \$15.30 in year 1 and then grow with inflation. Variable cost per unit is forecast to be \$9.20 in year 1 and then grow with inflation. Cash fixed costs are forecast to be \$7,940 in year 1 and then grow with inflation. What is the project NPV?

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