Question
A company plans to invest in a new manufacturing project over the next 12 years. The project will require an initial investment of $50,000, and
A company plans to invest in a new manufacturing project over the next 12 years. The project will require an initial investment of $50,000, and an additional investment of $12,000 in Year 3 and Year 4. Starting in Year 2, the company will reduce their labour costs by $8,500 a year for 5 years, and $6000 a year for the next 4 years. At the end of the project, there will be a residual value of $17,000.
- If the companys cost of capital is 10%, calculate the net present value for this project. (Show ALL Cash Flow entries in the table provided.)
- Should the company undertake the project? Explain your answer.
1. If the companys cost of capital is 10%, calculate the net present value for this project. (Show ALL Cash Flow entries in the table provided.)
Year | Net Cash Flow |
2. Should the company undertake the project? Explain your anwser.
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