Question
Q1 ABC Company is studying a project that would have a 4 year life and require a $1,600,000 investment equipment. At the end of eight
Q1 ABC Company is studying a project that would have a 4 year life and require a $1,600,000 investment equipment. At the end of eight years, the project would terminate and the equipment would have no value left over. The project would provide net income each year as follows: Sales 3,200,000 Less COGS 300,000 Gross Margin 2,900,000 Less: Operating Expenses Advertising, Salaries and other fixed 1,050,000 Salary Expense 1,300,000 Amortization 100,000 Total Expenses 2,450,000 Net Income 450,000 The company's discount rate is 18% 1) compute the net annual cash inflow from project 2) compute the net present value of the project. Is it acceptable?
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