Question
Consider a project that has 6 years of life time. This project requires investment of $1,000,000 at time zero for machinery and equipment to be
Consider a project that has 6 years of life time. This project requires investment of $1,000,000 at time zero for machinery and equipment to be depreciated over 5 year with half year straight line depreciation method (starting in year 1 to year 6). Annual revenue is estimated to be $600,000 and annual operating costs of $180,000. Also, $250,000 for working capital investment is needed at time zero and working capital return is expected to equal the initial working capital investment at the end of the project (6th year). Salvage value of the machinery and equipment is expected to be zero. The minimum After Tax Cash Flow ROR is 12% and the effective income tax rate is 40%. Calculate After Tax Cash Flow, NPV, and ROR of the project.
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