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A) Question and template attached. Please solve the question as per attached template. Attach the template and solution in a word document as picture. B) You have been hired as a consultant for Pristi
Question and template attached. Please solve the question as per attached template. Attach the template and solution in a word document as picture.
You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly. The company bought some land three years ago for $2.1 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.3 million on an aftertax basis. In four years, the land could be sold for $2.4 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketing report is as follows: BUS 550 Hybrid Syllabus 38 of 48 The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we BUS 550 Hybrid Syllabus 28 of 36 feel that the company will be able to sell 3,600, 4,300, 5,200, and 3,900 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a premium price of $750 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the fouryear period, sales should be discontinued. PUTZ believes that fixed costs for the project will be $415,000 per year, and variable costs are 15 percent of sales. The equipment necessary for production will cost $3.5 million and will be depreciated according to a three-year MACRS schedule. At the end of the project, the equipment can be scrapped for $350,000. Net working capital of $125,000 will be required immediately. PUTZ has a 38 percent tax rate, and the required return on the project is 13 percent. What is the NPV of the project?
Please solve the question as per attached template. Attach the template and solution in a word document as picture.
Also in the word document please write 7 to 10 points of how you reached to the solutions.
Please follow APA format.