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Silver Line Ltd. is planning to manufacture computers and is planning to invest in new software. You need to analyze whether the company should invest in this proposal - The company will have to spend \$5 million to commercially develop the software, and the investment will be depreciated straight line over 4 years to a salvage value of $1 million at the end of the 4th year. - The company spend \$10,000 on a market study. Based on that, the company concludes that it can generate revenues of $6 million every year for the first year and then the revenue will increase by 10% each year. The operating expenses (other than depreciation) are expected to be 30% of the revenues each year - The company additionally plans to invest $5,000 towards selling and administration expenses to make sure the software receives recognition - The working capital is 60,000 each year starting in year 0 and increases by 10% each year. - The tax rate is 40% and the discount rate is 8%. Would you suggest taking up the proposal? Silver Line Ltd. is planning to manufacture computers and is planning to invest in new software. You need to analyze whether the company should invest in this proposal - The company will have to spend \$5 million to commercially develop the software, and the investment will be depreciated straight line over 4 years to a salvage value of $1 million at the end of the 4th year. - The company spend \$10,000 on a market study. Based on that, the company concludes that it can generate revenues of $6 million every year for the first year and then the revenue will increase by 10% each year. The operating expenses (other than depreciation) are expected to be 30% of the revenues each year - The company additionally plans to invest $5,000 towards selling and administration expenses to make sure the software receives recognition - The working capital is 60,000 each year starting in year 0 and increases by 10% each year. - The tax rate is 40% and the discount rate is 8%. Would you suggest taking up the proposal
