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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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