Reference no: EM132993380
The firm is now (in 2021) considering the following investment opportunity for the period 2022-2029.
Data is as follows
Initial Outlay =$1,600,000
Upgrade = $700,000 Required at the end of Year 4
Incremental Sales = 350,000 Increased sales units per annum - (Year 5-8)
Working Capital = $45,000 Increase required
Estimated Life =8 Years
Salvage Value = $60,000
Depreciation Rate = 0.125 For tax purposes
The machine is fully depreciated by the end of its useful life
Other Cash
Expenses = $60,000.00 Per annum (Years 1-4)
Other Cash Expenses = $76,000.00 Per annum (Years 5-8)
Production Costs = $0.15 Per Unit
Sales price = $0.75 Per Unit (Years 1-4)
Sales price = $1.02 Per Unit (Years 5-8)
Sales estimates for next 8 years starting from 2022
Year = Sales (Units)
2022 = 679651
2023 = 694903
2024 = 710155
2025 = 725406
2026 = 740658
2027 = 755909
2028 = 771161
2029 = 786413
Problem 1: Calculate the Net Present Value, Internal Rate of Return and Payback Period
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