Given the following information, estimate the cash flows of this project and then compute the NPV...

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Finance

Given the following information, estimate the cashflows of this project and then compute the NPV of thisproject.
Estimated Sales: 50,000 units per year for each of the next 3years
Estimate Sale Price: $1,050 per unit
Variable Cost: $1,000 per unit
Fixed Costs: $1,500,000 per year
Initial Investment in Plant and Machinery: $1,500,000 to bedepreciated to a salvage value of $0 over the next three years. Wesell the machine at $45000 in the market at the end of 3 years.
Additions to Net Working Capital: $50,000 at the beginning ofthe project
Corporate Tax Rate: 34%
Cost of capital: 18%
Sale price will go up by 10% every year
Variable cost will go up by 8% per year
What if salvage value is $45,000?

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3.7 Ratings (609 Votes)

Cash Flow at the end of year 12 and 3 are 830000 1655000 and2660300 Calculation given belowIf we See Answer

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Given the following information, estimate the cashflows of this project and then compute the NPV of thisproject.Estimated Sales: 50,000 units per year for each of the next 3yearsEstimate Sale Price: $1,050 per unitVariable Cost: $1,000 per unitFixed Costs: $1,500,000 per yearInitial Investment in Plant and Machinery: $1,500,000 to bedepreciated to a salvage value of $0 over the next three years. Wesell the machine at $45000 in the market at the end of 3 years.Additions to Net Working Capital: $50,000 at the beginning ofthe projectCorporate Tax Rate: 34%Cost of capital: 18%Sale price will go up by 10% every yearVariable cost will go up by 8% per yearWhat if salvage value is $45,000?