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Would you take this project? Is it a good investment? See more info from the image attached. Pls provide step by step answers thanks With
Would you take this project? Is it a good investment? See more info from the image attached. Pls provide step by step answers thanks
With the transition to electric vehicles, you believe there is a potentially profitable opportunity to establish a network of charging stations for the vehicles. You would like to evaluate the project over a 10 year life. Costs, sales and operating expenses relating to the project are: 1) You would establish 50 stations at a cost of $25,000 each. For simplicity assume this occurs immediately. 2) Each station has an estimated life of 10 years. They are to be depreciated on a straight line (prime cost) basis for tax purposes based on this life. At the end of that period you believe you could sell them as scrap for $2,000 each. 3) Investment in working capital is $250,000. 4) Each station provides revenue of $4,500 pa in the first year. Revenue growth is 20% pa for 5 years then 10% thereafter. 5) Lease of all land for the project costs $55,000 pa. There are other cash fixed costs of $19,000 pa and cash variable costs equivalent to 25% of revenue. 6) Assume tax is paid one year after the year of income. 7) The company tax rate is 30 per cent 8) The company required rate of return after-tax is 7.5 per cent. Required: Should you undertake the project? Why? (6 marks)Step by Step Solution
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