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Compute the npv and irr

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Reference no: EM131044535

Please compute the NPV and IRR for the following:

  • Initial investment outlay of $40 million, consisting of $35 million for equipment and $5 million for net working capital (NWC) (plastic substrate and ink inventory); NWC recoverable in terminal year
  • Project and equipment life: 5 years
  • Sales: $27 million per year for five years
  • Assume gross margin of 50% (exclusive of depreciation)
  • Depreciation: Straight-line for tax purposes
  • Selling, general, and administrative expenses: 10% of sales
  • Tax rate: 35%
  • Assume a WACC of 10%

Based upon this information, should this project be accepted?  Why or why not?

Reference no: EM131044535

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