This case continues following the new project of the WePROMOTECompany, that you and your partner own. WePROMOTE is in thepromotional materials business. The project being considered is tomanufacture a very unique case for smart phones. The case is verydurable, attractive and fits virtually all models of smart phone.It will also have the logo of your client, a prominent, localcompany and is planned to be given away at public relations eventsby your client. As we know from prior cases involving this company,more and more details of the project become apparent and with moreprecision and certainty. The following are the final values to thedata that you have been estimating up to this point: • You canborrow funds from your bank at 3%. • The cost to install the neededequipment will be $105,000 and this cost is incurred prior to anycash is received by the project. • The gross revenues from theproject will be $25,000 for year 1, then $27,000 for years 2 and 3.Year 4 will be $28,000 and year 5 (the last year of the project)will be $23,000. • The expected annual cash outflows (currentproject costs) are estimated at being $13,000 for the first year,then $12,000 for years 2, 3, and 4. The final year costs will be$10,000. • Your tax rate is 30% and you plan to depreciate theequipment on a straight-line basis for the life of the equipment. •After 5 years the equipment will stop working and will have aresidual (salvage) value of $5,000). • The discount rate you areassuming is now 7%. Requirements of the paper: • Perform the finalNPV calculations and provide a narrative of how you calculated thecomputations and why.
• Then provide a summary conclusion on whether you shouldcontinue to pursue this business opportunity.
• Provide the final, accurate NPV calculations.
• A narrative on how the NPVs were calculated. The narrativeshould include how the data relating to depreciation and its taxconsequences affect the cash flow of the project.
• Supporting narrative based on research of sources other thanthe textbook materials.
• Provide a conclusion on whether this business opportunityshould be pursued.
