Reference no: EM132887737

A group of entrepreneurs wants to start a new business. For this, he plans to buy a plot of land (€ 40,000) and build a warehouse (€ 25,000) that will be amortized on a straight-line basis over 4 years. To make itself known, it is convenient for the company to carry out a small advertising campaign that will cost € 4,000.

With these facilities, he expects to obtain an annual income of € 100,000.

Annual expenses are estimated at:

Raw material: € 30,000

Labor: € 40,000

General expenses: € 8,000.

• The intention of the group is to maintain the company for 4 years, after which the plot will be sold for € 45,000 and the warehouse for € 7,000.
• In addition, the average maturation period is estimated to be 30 days.
• The business will be financed 100% with contributions from entrepreneurs, who demand a 10% return.

Problem 1: Considering the business year (360 days) and a 35% tax rate, determine if the project is viable from a NPV point of view.