Determine the initial investment cash flow

Reference no: EM132474268

	Year 1	Year 2	Year 3	Year 4	Year 5
Beginning	1/7/2020	1/7/2021	1/7/2022	1/7/2023	1/7/2024
Ending	30/6/2021	30/6/2022	30/6/2023	30/6/2024	30/6/2025
Production quantity (tons)	120	150	170	175	185
Price (per tons)	$9.000	$9.150	$9,250	$9,300	$9,350

Question 1. Discuss which costs are relevant for the evaluation of this project and which costs are not. Your discussion should be justified by a valid argument and supported by references to appropriate sources

Question 2. Determine the initial investment cash flow.

Question 3. Estimate all operating cash flows associated with the project over 5 years.

Question 4. Calculate the project's payback period. Assuming the business could be sold at the end of the five years for $1 million. Briefly comment on your results

Question 5. Calculate the Net present value (NPV) of the project, assuming that the initial investment could be sold at the end of the five years for $1 million. Briefly comment on your results and make appropriate remarks on the assumptions made for these calculations if necessary.

Question 6. Estimate the Internal rate of return (IRR) of the project. Briefly comment on your results

Question 7. Using sensitivity analysis, recalculate NPV using the scenario of

a. A decrease in project sales by 9% annually.

b. An increase of the sale price by 4% annually

c. An increase of material costs change from 3.5% to 7%

Attachment:- hfc.rar

Reference no: EM132474268

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