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Please help need this as soon as possible, will kindly and gladly upvote! Revenues generated by a new fad product are forecast as follows: Year
Please help need this as soon as possible, will kindly and gladly upvote!
Revenues generated by a new fad product are forecast as follows:
Year | Revenues |
---|---|
1 | $ 50,000 |
2 | 40,000 |
3 | 20,000 |
4 | 10,000 |
Thereafter | 0 |
Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 20% of revenues in the following year. The product requires an immediate investment of $40,000 in plant and equipment.
Required:
- What is the initial investment in the product? Remember working capital.
- If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation, and the firms tax rate is 30%, what are the project cash flows in each year?
- If the opportunity cost of capital is 12%, what is project NPV?
- What is project IRR?
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