Assignment : Project Valuation

Use the following information to determine the NPV and MIRR of the project.

A project requires an investment in machinery today of $16 million.

The machine is depreciated on a straight-line basis to zero over 4 years.

Starting one year from now and ending 4 years from now, the project will generate annual revenues of $18 million and operating expenses are 70% of revenue.

At year 4, the machinery will be sold for $4 million (salvage value). The firm is taxed at 20%. The cost of capital is 12%.

What is the projects NPV and MIRR? Should the project be accepted?

The old answer posted here is not correct