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Suppose yoi are reviewing a capital budget proposal. According to the proposal, an investment of...

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Finance

Suppose yoi are reviewing a capital budget proposal. According to the proposal, an investment of $454,000 of equipment, $54,000 in inventory, $66,000 in accounts receivable, partially offset by an increase $22,000 in accounts payable. The equipment will be placed in the 30% CCA asset class. The projected revenue is $540,000 and $390,000 in costs each year, during the projects 6 year life cycle. The required return on investment of 14% and the marginal income tax rate is 30%. At the end of 6 years, the net working capital investment is recovered in full and the equipment will have zero salvage value. Calculate the projects NPV using the six-step approach.
1) Initial investment?
2) PV of operating income?
3) PV of CCA?
4) PV of working capital?
5) Net Present Value?
6) Approve or reject project?

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