Question
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million
PADICO is considering an investment project. The project requires an initial $5 million outlay for equipment and machinery. Sales are projected to be $2.5 million per year for the next four years. The equipment will be fully depreciated straight-line by the end of year 4. The cost of goods sold and operating expenses (not including depreciation) are predicted to be 30% of sales. The equipment can be sold for $500,000 at the end of year 4.Padico also needs to add net working capital of $100,000 immediately. The networking capital will be recovered in full at the end of the fourth year. Assume the tax rate is 40% and the cost of capital is 12%.
A-what is the initial investment
B-what is the OCF
C-what is the terminal value
D-What is the NPV of this investment?
I NEED TO SEE EACH STEP SOLUTION WRITING THE ANSWER ONLY IS CONSIDERED WRONG
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