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Can you please solve it in step for me. Thank you so much. You have to decide to invest or not for an expansion project.
Can you please solve it in step for me. Thank you so much.
You have to decide to invest or not for an expansion project. The project has an expected 5 years life. We assume that sales will be equal to $55,000 each year, variable cash operating expenses $18,000; and fixed operating expenses $24,000. Fixed operating expenses contain depreciations. We consider an investment outlay of $100,000 concerning fixed capital items that will be depreciated straight-line to zero over five years. We assume an annual investment in net working capital to t = 0 to t = 5 of $5,000. The expected after-tax salvage value is equal to $6,000. The tax rate is equal to 34%. 1) Determine the cash flows. 2) The expected rate of return is equal to 10%. What is the project NPV? 3) The IRR is equal to 12.14%. Is it compatible with the decision given by the NPV? Why Step by Step Solution
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