A company is planning a new investment and 72,000 is the amount that is required to be paid for starting this investment, while the investment is expected to have three years useful life. Depreciation is expensed on a straight-line basis (meaning the same amount is expensed in each period over the assets useful life). In the end of the useful life of this investment, the residual value (salvage value) of this investment is expected to be insignificant. Net sales revenue is 55,000 for the first year and is expected to increase progressively by 15% (compared to the previous year) till the end of the investment. Cost of goods sold (depreciation is not included) are equal to 40% of the net revenues from sales till the end of the investment. The selling, general and administrative (SGA) expenses of the investment (depreciation is not included) are 5,000 per year. Acceptable payback period for the investment are 2.5 years. Using this information, you are required to: . Calculate the gross profit and the profit or loss (after taxes) per year if the tax rate for the company is 20%.

. valuate the investment with Simple payback evaluation technique (Assuming three decimal points). Should the company run this investment?

C. If Net sales revenue that is 55,000 for the first year is not expected to increase progressively by 15% (compared to the previous year) and will remain stable till the end of the investment, should the company now run this investment?