Question
The company is considering an innovative project. The project is designed for 3 years and will require additional investment for the re-equipment (new equipment): $1
The company is considering an innovative project. The project is designed for 3 years and will require additional investment for the re-equipment (new equipment): $1 million for the 1 equipment (the company will buy it before the 1" year starts) and $1.5 million for the 2d equipment (the company will buy it in January of the 20 year). Depreciation of planned equipment is assumed to be linear: standard service life: 10 years for the 1st one and 5 year for the 2d one. Managers want to sell these facilities in the end of the project: each one for $0.9 million. It is planned to sell 2500 products per year, the price of each one is $1300. Variable conts per product will he $700, fixed conte (including depreciation) - $600 thousand per year. The cost of the company's capital is estimated at 10%. The rate of income tax - 20%. Property tax - 2.2%. evaluate the investment attractiveness of the project by calculating the NPV and PP. Make conclusions on effectiveness and reasons of project effectiveness, Fill up the table below
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