Reference no: EM132927922

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.

Calculate a 3-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