IBL PROJECT

Company X has to consider the IBL project that can increase the value of the company overall.

The company pays 18% tax. The company will also receive an interest return on the additional fund that will be invested and receive income of $3400.

The salvage value of the CAPEX is $13000 and after the project the company can sell the asset for $7000.

Project A

CAPEX	$26,700
Rent expense	$2700
Supplies expense	$2750
Prepaid expense	$1500
Utilities expense	$1800
Insurance expense	$500
Unearned Revenue	$3200
Gas Expense	$520
Project period	5 years

Sales

$10,500

Discount rate table

GDP	3%
Risk free	6%
Risk premium	2.5%
Interest Rate	8%

REQUIRED

1. Calculate the initial investment, After tax cash flow and terminal value of the project .

2. Calculate the discounted payback period of the project

3. Estimate the NPV and PI of the project

4. What is the IRR of the project ?

Project Bs results are given on the table below

DPBP	3 years
NPV +	2200
PI	1.20
IRR	15%
Payback Period	2.8 years

5. Considering project B which one is the best and why.?