This company is planning to invest in a project called Ellayiah . The management accounting department received
Question:
This company is planning to invest in a project called Ellayiah . The management accounting department received the following information
Capex
$45000
Project period
5years
Revenue
$19000
Supplies expense
6000
Salary
3500
Utilities
500
Discount Rate
7.5%
Sale of asset @ end of project
$20,000
Net working Capital
$15700
The company's tax rate is 12%. The project also earned $5200 as interest revenue. The capital expenditure is depreciated using straight line method over the project and will have a residual value of $15000 . the company will have to rent a building for $4000 during the project life. The net working capital will be returned at the end of the project
REQUIRED
a) Calculate the initial investment
b) Calculate each year cash flow
c) Calculate the terminal value of the asset used
d) Calculate the NPV
e) Calculate the Profitability Index [PI]
f) Calculate IRR of the project