Reference no: EM132633141
Learner company is considering a project that would have an eight-year life and require a 2,400,000 investment in equipment. At the end of 8 years, the project would terminate and the equipment would have no salvage value.
The project would provide net operating income each year as follows:
Sales 3,000,000
Variable expenses 1,800,000
Contribution margin 1,200,000
Fixed expenses:
Advertising, salaries & other out of
Pocket costs 700,000
Depreciation 300,000 1,000,000
Net Operating Income 200,000
The company's discount rate is 12%.
Problem 1: Compute for the following:
a. Annual net cash inflow
b. NPV
c. Payback Period
d. ARR