Compute the expected net present value for the investment

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Finnick Company expects to sell 100,000 units of its product annually for the next four years at P 9 each, with variable cost of P 6 per unit, and annual cash fixed costs of P 250,000. The product requires machinery costing P 320,000 with a four year life and no salvage value at the end of four years. The company will depreciate the machine using the straight line depreciation method. Additionally, working capital, in the form of receivables and inventory, will increase by 150,000. This additional working capital will be returned in full at the end of four years. The tax rate is 40%, and the cost of capital is 12%.

Question 1: Compute the expected net present value for this investment.

Question 2: Compute the profitability index for this investment.

Reference no: EM132603258

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