Question
Problem 2 mine the firm intrinsic Suppose a company is considering the following project, where all of the dollar figures are in thousands of dollars.
Problem 2 mine the firm intrinsic Suppose a company is considering the following project, where all of the dollar figures are in thousands of dollars. In year 0 the project requires $14150 as initial cost which depreciated by using straight line method over 8 years and there is a salvage value of 3000 in the last year. The project is forecast to generate sales of 3500 units in the first year rising by 500 units for every year to the last year. The inflation rate is forecast to be 2.2%, 2.4%, 2.6 %, 2.8%, 3.0%, 3.2%, 3.4% and 3.6% from year 1 to 8 respectively. The real cost of capital is forecast to be 7.7%, 7.8%, 7.9%, 8.2%, 8.4%, 8.5%, 8.7% and 9% from year 1 to 8 respectively. The tax rate is forecast to be constant 28%. Sales revenue per unit is forecast to be $11.10 in year 1 and grow with inflation. Variable cost per unit is forecast to be $6.8 in year 1 and grow with inflation. Cash fixed costs are forecast to be $4020 in year 1 and then grow with inflation. What is the project NPV?solution on excel
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