You are provided with the projected income statements for a project:

Year	1	2	3	4
Revenues ( MUR '000)	10,000	11,000	12,000	13,000
Less Cost of Goods Sold ( MUR '000)	4,000	4,400	4,800	5,200
Less Depreciation ( MUR '000)	4,000	3,000	2,000	1,000
Earnings Before Interest and Tax ( MUR '000)	2,000	3,600	5,200	6,800

The tax rate is 40%. The project requires an initial investment of MUR 15 million and an additional MUR 2 million at the end of year 2. The working capital is anticipated to be 10% of revenues and the working capital investment has to be made at the beginning of each period.

Estimate the free cash to the firm for each of the 4 years, the payback period for investors in the firm, and the net present value if the cost of capital is 12 %? Would you accept the project?

The firm plans to finance 40% of its net capital expenditure and working capital needs with debt. The interest rate on debt is 10%. Estimate the free cash to equity for each of the 4 years, the payback period for equity investors in the firm, and the net present value if the cost of equity is 16 %? Would you accept the project?

Explain how currency effects should be treated in investment analysis.

What in your opinion make a good project?