Question
You are thinking of starting a business producing face shieldsthat require initial investment of $90,000. You plan to retire 10 years from now, hence will
You are thinking of starting a business producing face shieldsthat require initial investment of $90,000. You plan to retire 10 years from now, hence will sell the business in 10 years. The annual operating expenses is estimated to be $40,000. You foresee the demand for face shields is high in the recent years and expect to have annual revenue of $100,000 in the first two years, followed by an annual revenue of $60,000 for the remaining years. After 10 years,the salvage value of equipment at that time is expected to be $40,000. Your MARR is 25% effective. Assume expenses occur at the beginning of each year and revenue at the end of each year.
(a) Calculate the payback period.Express your answer in 2 decimal places
(b) Calculate the NPV for the business.Express your answer in 2 decimal places.
(c) What is the IRR?Express your answer in percentage and 2 decimal places.
d) Should you invest in this business? Explain why and why not.
A.Yes, NPV0
B. Yes, NPV<0
C. No, NPV0
D. No, NPV<0
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