Compute the projects net present value

Reference no: EM132849298

Question: Dasher, Inc., is considering a project that would have a five-year life and would require a $1,000,000 investment in equipment. At the end of five 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 $950,000
Variable Expenses 500,000
Contribution Margin 450,000
Fixed Expenses: Fixed out-of-pocket cash expenses 100,000
Depreciation 50,000 150,000
Net Operating Income $300,000

All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 10%.

Required:

a. Compute the project's net present value.

b. Compute the project's internal rate of return to the nearest whole percent.

c. Compute the project's payback period.

Reference no: EM132849298

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