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A retail store is hoping that a new marketing campaign will improve their store sales. Given the schedule of annual incremental cash flows shown below,
| A retail store is hoping that a new marketing campaign will improve their store sales. | |||||||
| Given the schedule of annual incremental cash flows shown below, calculate the NPV and IRR of this project. | |||||||
| Assume the company's average tax rate is 25% and cost of capital is 4.6%. | |||||||
| Year 0 | $ (4,400) | ||||||
| Year 1 | 1800 | ||||||
| Year 2 | 1350 | ||||||
| Year 3 | 1013 | ||||||
| Year 4 | 760 | ||||||
| Year 5 | 570 | ||||||
| Year 6 | 1800 |
What is the net present value (NPV) of this project?
What is the internal rate of return (IRR) of this project?
Should the company pursue the project?
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Fundamentals of corporate finance
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
2nd Edition
978-0470933268, 470933267, 470876441, 978-0470876442
