5. A project has equipment requirements that will cost $150,000 installed. NWC of $50,000 will also be required. The project is replacing old equipment that can be sold for $25,000, book value 0. Assume that the equipment will be depreciated as a 3 year asset under MACRS. The useful life is 5 years.

a. What is the NINV for the project? Calculate the depreciation for each of the 5 years of the assets life. $150,000 Installation + $50,000 net working capital - $25,000 equipment sale + $10,000 Tax on equipment sale (25,000 *.4) = $185,000

b. Assume the FCF for the project is $95,000 per year for 5 years. Calculate the NPV, IRR, MIRR and PI for the project, if your required rate is 12%?

TABLE 1 Year 15-year 20-year MACRS Half-Year Convention Depreciation Rate for Recovery Period 3-year 5-year 7-year 10-year 33.33 20.00 14.29 10.00 44.45 32.00 24.49 18.00 14.81 19.20 17.49 14.40 7.41 11.52 12.49 11.52 11.52 8.93 9.22 5.76 8.92 7.37 8.93 6.55 4.46 6.55 6.56 6.55 3.28 7 8 5.00 9.50 8.55 7.70 6.93 6.23 5.90 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95 10 11 12 13 14 15 16 17 18 19 20 21 NOOGNOVO ON 3.750 7.219 6.677 6.177 5.713 5.285 4.888 4.522 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 2.231