Margarite's Enterprises is considering a new project. The project will require $325,000 for new ﬁxed assets, $160,000 for additional inventory and $35,000 for additional accounts receivable.
Accounts payable is expected to increase by $100,000 and long-term debt is expected to increase
By $300,001. The project has a 5-year life. The ﬁxed assets will belong in a 30% CCA class. At the
End of the project, the ﬁxed assets can be sold for 25% of their original cost. The net working
Capital returns to its original level at the end of the project. The project is expected to generate
Annual sales of $554,000 and costs of $430,001. The tax rate is 35% and the required rate of return
Is 15%.
What is the initial cost of this project?

Question

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The Answer of Margarite's Enterprises is considering a new project. The project will require $325,000 for new ﬁxed assets, $160,000 for additional inventory and $35,000 for additional accounts receivable.
Accounts payable is expected to increase by $100,000 and long-term debt is expected to increase
By $300,001. The project has a 5-year life. The ﬁxed assets will belong in a 30% CCA class. At the
End of the project, the ﬁxed assets can be sold for 25% of their original cost. The net working
Capital returns to its original level at the end of the project. The project is expected to generate
Annual sales of $554,000 and costs of $430,001. The tax rate is 35% and the required rate of return
Is 15%.
What is the initial cost of this project?

Margarite's Enterprises Is Considering a New Project