Calculate the free cash flow of the project for each year

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Question - Your Company invested $5 million in marketing campaign to assess the demand for the product Minish. This product will be in the market next year and will last five years. Revenues are projected to be $50 million per year along with expenses of $20 million. You will need to spend $20 million immediately on equipment that will be depreciated using straight line depreciation to zero. Additionally, you will use some fully depreciated existing equipment that has a market value of $4 million. Finally, the working capital levels will increase from their current level of $5 million to $15 million immediately. They will remain at the elevated level until year 5, when they will return to $5 million. The discount rate for this project is 5% and its tax rate is 30%. Based on this information,

a. Calculate the free cash flow of the project for each year. Please show your work in an excel file.

b. Write down the NPV equation based on a. Calculate NPV of the project. Will you accept the project?

c. Write down the IRR equation based on a. Calculate IRR of the project?

Reference no: EM132961765

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