The company is going to analyse a new investment project, Ask an Expert

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The company is going to analyse a new investment project which has the following characteristics:

Unit price $5.00

Annual Unit Sales 50,000

Variable cost per unit $3.00

Investment into new machinery (t=0) $40000

Investment in working capital $50000 (fully recovered at the end of project)

Project life 6 years

Annual Depreciation $60000

Market value of machinery (t=6)

Tax rate 25% (the same for profits and capital gains)

Required rare of return 10%

QUESTIONS: (Show all calculation stages)

A) Find the project cash flows

B) Evaluate the project NPV

C) Should the company invest in such project? Explain.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92173061

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