Revenues generated by a new fad product are forecast as follows Year Revenues 1 $50,000 2 35,000 3 30,000 4 20,000 Thereafter 0 Expenses are expected to be 40 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 $60,000 in plant and equipment Required a What is the initial investment in the product Remember working capital b 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 20 , what are the project cash flows in each year Assume the plant and equipment are worthless at the end of 4 years c If the opportunity cost of capital is 10 , what is the project's NPV d What is project IRR

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Revenues generated by a new fad product are forecast as follows  Year Revenues 1 $50,000 2 35,000 3 30,000 4 20,000 Thereafter 0 Expenses are expected to be 40  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 $60,000 in plant and equipment  Required  a  What is the initial investment in the product  Remember working capital  b  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 20 , what are the project cash flows in each year  Assume the plant and equipment are worthless at the end of 4 years  c  If the opportunity cost of capital is 10 , what is the project's NPV  d  What is project IRR

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Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $50,000 2 35,000

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Auditing and Assurance Services An Applied Approach

Revenues generated by a new fad product are forecast as follows: Year Revenues 1 $50,000 2 35,000

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Auditing and Assurance Services An Applied Approach

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