Compute the annual cash inflow over the project life

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Reference no: EM133160263

Question - Arvin Glass Co. is considering an expansion of an existing product line. The additional plant and equipment, which will cost P8,000,000, will be depreciated on a straight-line basis over its 20-year economic life. Sales are expected to equal P12,000,000 per year, and manufacturing and other operating costs are expected to equal P9,000,000 per year. These sales will require additional net working capital of P1,000,000. The plant and equipment are expected to have a salvage value of P2,000,000. The tax rate is 40%. The require rate of return is 10%.

Required -

a. Compute the net cost of investment.

b. Compute the annual cash inflow over the project's life.

c. Compute the cash inflow upon project termination.

d. Compute the NPV of the proposed expansion.

Reference no: EM133160263

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