Data Mining is considering an expansion project. The companys management has decided that the initial cost of the project is $300,000 with an additional installment cost of $80,000. The project life is four years, during its life the project will depreciate based on the following rates: 1st year 33% 2nd year 45% 3rd year 15% 4th year 7% Management has also decided that an additional of $45,000 in inventories and $12,000 in accounts payable needed if the project taken today. During the next four years, the expected quantity of merchandise to be sold each year is 15,000 units at a price of $50 per unit. The projects fixed cost and total variable costs estimated to be $350,000. The project has been assigned a salvage value of $45,000 at its end life after four years and the weighted average cost of capital of 10%. *tax rate is 40%.

Based on the companys information, the fixed capital investment(Depreciable Basis) is *

$300,000

$380,000

$220,000

$400,000

2) The change in net working capital is : *

$33,000

$45,000

$57,000

$47,000

3) Then, initial investment (I0) can be calculated as : *

$410,000

$412,000

$413,000

$415,000

4) The depreciation of the 1st year is *

$120,300

$125,400

$130,300

$116,000

5) The depreciation of the 2nd year is

$150,000

$171,000

$154,000

$183,000

6) The depreciation of the 3rd year is *

$57,000

$49,000

$40,000

$41,000

7) The depreciation of the 4th year is *

$26,200

$26,300

$26,500

$26,600

8) The the net operating cash flow after tax for the first year is *

$290,160

$285,700

$290,700

$285,900

9) The the net operating cash flow after tax for the second year is *

$255,000

$308,400

$450,600

$460,000

10) The net operating cash flow after tax for the third year is *

$250,000

$352,100

$262,800

$360,000

11) The the net operating cash flow after tax for the 4th year is *

$200,440

$300,360

$400,000

$250,640

12) The Book Value of the fixed asset at the termination after four years is *

$49,200

$0

$45,000

$45,200

13) The termination value at the end life of the project is calculated as *

$45,000

$77,760

$78,000

$$60,000

14) The NPV of the project is equal to *

$458,157.4

$645,998.5

$515,274.7

-$252,998.2

15) In conclusion, what is your decision regarding the project *

Reject the project

Accept the project

Can't determine

either accept or reject based on economic conditions