Question
Your company has asked you to do preliminary analysis on a new four-year project.The project would increase projected sales by $125,000 each year for four
Your company has asked you to do preliminary analysis on a new four-year project.The project would increase projected sales by $125,000 each year for four years.The project would have annual costs of $70,000 and require the purchase of a piece of equipment for $47,200.The company uses straight line depreciation and the equipment would have zero value at the end of the project.
(For this question, you must use a separate piece of paper to show your work for each part of this question.You must draw a timeline of the cashflows for part c which asks for NPV.The last question on this exam will ask you to take a picture of your work an upload it.)
Format your answers to the nearest penny (or two places past decimal), with a dollar sign or percent sign, and with a comma when appropriate.
1) Assuming a tax rate of 21%, calculate net income.
2)Calculate the Operating Cash Flow for the project.
3)Assuming the project has an initial cost of $140,000 and lasts four years, calculate the NPV of the project assuming a required rate of return of 9.5%.(Draw a timeline of the cashflows.)
4)Calculate the Internal Rate of Return on the project.
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