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Calculate the initial investment

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Reference no: EM132756271

Question - Project Ellayiah - This company is planning to invest in a project called Ellayiah . The management accounting department received the following information

Capex $45000

Project period 5 years

Revenue $19000

Supplies expense 6000

Salary 3500

Utilities 500

Discount Rate 7.5%

Sale of asset @ end of project $20,000

Net working Capital $15700

The company's tax rate is 12%. The project also earned $5200 as interest revenue. The capital expenditure is depreciated using straight line method over the project and will have a residual value of $15000. The company will have to rent a building for $4000 during the project life. The net working capital will be returned at the end of the project.

REQUIRED -

a) Calculate the initial investment?

b) Calculate each year cash flow?

c) Calculate the terminal value of the asset used?

d) Calculate the NPV?

e) Calculate the Profitability Index [PI]?

f) Calculate IRR of the project?

Reference no: EM132756271

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