Calculate the base-case cash flow and NPV

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Question - A firm is evaluating a project that costs RM125,000, has a six-year life and has a salvage value of RM14,000. Assume that depreciation is straight line on the life of the project. Working capital of RM 15,000 is needed initially and the same will be released in the final year. Sales are projected at 25,000 units per year with a selling price of RM 10.50 per unit, variable cost RM 7.50 per unit, and fixed costs are RM 20,000 per year. The tax rate is 25% and the required rate of return is 13% on this project.

Required -

1. Calculate the base-case cash flow and NPV. Interpret your findings.  

2. Compute the internal rate of return (IRR).

Reference no: EM132722308

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