Alpha Ltd is considering investment in a project with the below details. Analyse this investment...
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Alpha Ltd is considering investment in a project with the below details. Analyse this investment using only the Economic Value-Added Method (EVA):
It is a three-year project with initial investment of $15 Million, depreciating over three years using straight line method with zero salvage (residual) value at the end of year three.
Estimated EBITDA for years 1-3 are $5 Million, $7 Million, and $8 Million, respectively with WACC 12% and tax rate 30%.
Increases in net working capital investment each year is 25% of previous year end invested capital. Should Johnson invest in this project?
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