Question
GE Corporation has a new project with an economic life of six years. The project requires an initial investment of $180,000 at time 0. This
GE Corporation has a new project with an economic life of six years. The project requires an initial investment of $180,000 at time 0. This investment can be depreciated at the following annual rates: Year 1: 20%, Year 2: 32%, Year 3: 19%, Year 4: 12%, Year 5: 11%, and Year 6: 6%.
Also, the price of the product is forecasted to increase by 5% every year from an initial $7 at time 1. Quantity is predicted to be 30,000 units in the first period and expected to increase 3% every year. The projects operating costs per unit is forecasted to be $4 for the first year, and expected to go up by 10% every year. After six years, the projects estimated salvage value is $20,000. NWC at time 0 is $50,000 and expected to increase by 20% every year. The companys WACC is 15 percent, and its corporate tax rate is 30 percent.
Find NPV, IRR, MIRR, and PI and decide if GE should accept this project. Show all your work in Excel
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