Problem
You are considering a three-year project to build lasers for tattoo removal. The project will require upfront investment of $945,000 for machinery with a forecasted salvage value of $600,000 after three years. Depreciation is straight-line to zero book value over six years. The required rate of return is 10% and the tax rate is 21%. Sales of the tattoo-removing lasers are projected at 80 units per year. In the first year, the price per unit is expected to be $35,000, variable costs are projected at $21,900 per unit, and total fixed costs are anticipated to be $500,000; these will all rise at 2% per year thereafter. What is the project's NPV?