Kaboo and Teraimoa are planning to invest in a Go advertising project. The marginal tax rate is 27% and the company tax rate is 31%. Due to their lack of financial expertise, they have asked your assistance in determining whether they should invest in Go advertising or not.

They have the following information:

The project has a life of 6 Years.

The equipment will be sold at the end of the project life for $45,000

The straight-line method is used in calculating depreciation

The tax authority has given this type of equipment depreciation an effective life of 5years,

Sales for the first year will be $75,000 and sales are expected to grow at 6% per annum for each year of the project.

COGS is 15% of Sales each year;

Working Capital will be 5.5% of sales revenues for each year. The Working capital investment has to be made at the start of each period. All working capital will be recovered;

Marketing Costs will be 2.5% per annum

The current market salary is $25000 per annum. They will need to hire 3 employees

The hurdle rate is 11%.

Required

A) Calculate the NPV for Go Advertising Project.

B) Advice Kaboo and Teraimoa on the acceptability of Go green project.