Reference no: EM132922143
Question - The following information is for a proposed project that will provide the capability to produce a specialized product estimated to have a short market life:
Capital investment is $1,000,000.
The cost of depreciable property, which is part of the $1,000,000 total estimated project cost, is $650,000.
The depreciable property is categorized in CCA 30% class, with 50% rule applicable.
The project analysis period is 3 years.
Annual operating and maintenance expenses are $636,000 in the first year, and then increase at the rate of 5% per year.
The company expects to make $1,250,000 of revenue from the sales of the new product.
Estimated salvage value of depreciable property at the end of three years is $280,000.
Corporate taxes are 40%
MARR is 15% per year.
Solve the question on Excel.
Calculate a three-Year cash flow statement for the project, and then calculate the following two questions listed below using Excel:
1. The Net Present Value of the project
2. The IRR of the project
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