Question
Lamar company is considering a project that would have an 5 year life and require $2,400,000 investment in equipment. At the end of 5 years,
Lamar company is considering a project that would have an 5 year life and require $2,400,000 investment in equipment. At the end of 5 years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows:
Sales- $3,200,000
Variable expenses- 1,800,000
Contribution margin- 1,400,000
Fixed Expenses:
- Advertising, salaries, and other fixed out of pocket cost - 700,000
-Depriciation- 300,000
-Total Fixed expenses- 1,000,000
Net operating income- 400,000
*** The company's Discount Rate is 12%
A) compute the annual net cash inflow from the project
B) Compute the project's net present value
C) Find the project's internal rate of return to the nearest whole percent
D) compute the projects pay back period
E) compute the project's profitability index
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