Determine the net present value and irr of voice soft inc

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Reference no: EM13874217

Voice-Soft Inc. is trying to determine whether to open a new product line, Voice-Write, a speech-to-text product, which is expected to be competitive for four years. The cost of the new capital equipment including shipping and installation is $3100. The equipment will last for 4 years. They use simple straight line depreciation and the salvage value is $400. For 2016 to 2019, sales are expected to be $4000, 4000, 4200, and 4200; and operating expenses, $2800, $2800, $2700, $2700. The company is expecting to lose operating income of $200 per year due to Voice-Write cannibalizing its current product, Voice-Speak. Regardless of your answer to part I above (WACC calculation) assume Voice-Soft has a tax rate of 40% and a weighted average cost of capital (WACC) of 12

Complete the Project cash flow statement below and then answer questions.


2015

2016

2017

2018

2019

Sales






Operating Expenses






Opportunity Costs






Depreciation






       Operating Income (EBIT)






Taxes






       Operating Income after taxes






Depreciation






       Cash Flow






Salvage Value






       Salvage Tax






Net Salvage Value






Initial capital Investment






Project Cash Flow






Determine the Net Present Value, IRR and should Voice soft make an investment? why?

Reference no: EM13874217

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