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Prepare a set of pro-forma financial statements for the following project: 1)Sales of 10,000 units/year @ $10 unit 2) Variable cost/unit is $5. Fixed costs
Prepare a set of pro-forma financial statements for the following project: 1)Sales of 10,000 units/year @ $10 unit 2) Variable cost/unit is $5. Fixed costs are $25,000/ year. 3)Project life is 3 years - The project has no salvage value. 4)Project cost is $30,000. Depreciation is $10,000 per year. -Notice this is "straight-line" 5)NWC or Net Working Capital i.The firm needs to invest $50,000 in inventory to start the project ii.They project that accounts receivable will be $10,000 and accounts payable will be $40,000. 6)The firm's required return is 20%. The tax rate is 30%. Please calculate NPV and IRR. Would you accept this project looking at NPV? Would you accept this project looking at IRR? Why
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