Question
Beyond Meat invested in a new piece of machinery to create a meatless meatball. The piece of machinery costed $200,000. Revenues for these meatballs are
Beyond Meat invested in a new piece of machinery to create a meatless meatball. The piece of machinery costed $200,000. Revenues for these meatballs are expected to be 150,000 for the first year and increase by 20% every year for five years. The machinery will be depreciated using straight-line over five years and have no salvage value. The variable costs will be 60% of the revenues. Working capital is expected to be $10,000 and will be invested at the beginning of the project and returned at the end of the project. Assuming a cost of capital of 12%, a tax rate of 35%, and a five-year project life, what is the NPV and IRR?
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