solv

Assume that you are analysing a capital budgeting project. The initial investment for buying machichnary and equipment cost \$5million and project will last for 5 year. The expected revenue is to be $2 million per year and operating cost is expected to be 30% of the total revenue. If the salvage (scrap) value at the end of 5 is estimated to be $0.50 million. You may use straight-line method to calculate the depreciation for the project. The tax rate is estimated to be 30% per annum. The project has the cost of capital of 10%. a. Calculate net cash flows for each year. b. Calculate the NPV and determine the payback period. c. Will you accept this project based on NPV? If the project payback policy is 4 years, will you accept this project