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  1. business
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  3. consider the following project being evaluated by

Consider the following project being evaluated by your company: The initial price of the...

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Finance

Consider the following project being evaluated by your company:

  • The initial price of the assets is $250,000 and will require $20,000 transportation and $5,000 installation.
  • Will be depreciated S/L over 7 years to zero salvage.
  • Market value for the asset at end of 5 years is expected to be $40,000 (the asset will be operated for only 5 years)
  • Net investment in NWC in year 0 (at the initial period) of $35,000
  • Sales, in the first year, are expected to be generated by the project $170,000.
  • Annual cost of goods sold 75% of sales.
  • Annual sales growth rate 3%
  • Marginal tax rate 30%
  • Cost of capital 10%

  1. Calculate the assets after-tax salvage in year 5.
  2. Calculate the projects net present value (NPV) and internal rate of return (IRR)

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