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calculation for each 7 years You are a senior financial analyst at PALTEL and you are requested to analyse the following project, where all of
calculation for each 7 years
You are a senior financial analyst at PALTEL and you are requested to analyse the following project, where all of the dollar figures are in thousands. In year 0, the project requires an $11,350 investment in plant and equipment which is depreciated using the straight-line method over seven years and has a salvage value of $1,400 in year 7. The project is forecasted to generate sales of 2,000 units in year 1.3,350 units in year 2,4,700 units in year 3, 6,050 units in year 4 rising to 7,400 units in year 5, 10.200 units in ycar 6 and declining to 1,800 units in year 7. Sales revenue per unit is forecasted to be $9.70. The variable unit cost for Direct Labour, Materials, Selling Expenses, and overhead are forecasted to be $3.50. $2.00, $1.20, and $0.70, respectively. Cash fixed costs for Lease Payment, Property Taxes, Administration, Advertising, and other cash fixed costs are forecasted to be $2,800, 8580, $450, 5930, and $520, respectively, the project will require working capital in the amount of $0.87 in year for every unit of next year's forecasted sales. You expect to sell the machines at the end of the project life for a gain of 600 dollars. The tax rate is constant at 35% and the cost of capital is forecasted to be 11.0% You are required to estimate the free cash flows for this project for each year and to calculate the project's NPV Step by Step Solution
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