Draw the timeline showing all cash flows

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You are considering a new project for your company. The project would result in projected increase in sales of $194,000 each year for five years. The project would have annual operating costs of $87,000 and depreciation of $13,000. (Ignore salvage value and net working capital in this problem.)

a. Draw the timeline showing all cash flows.

b. Assuming a tax rate of 21%, calculate net income.

c. Calculate operating cash flow for the project. (OCF = EBIT + Depreciation - Taxes)

d. Assuming the project has initial cost of $300,000 and lasts for five years, calculate the NPV of the project. Assume a 9% hurdle rate.

e. Calculate IRR

f. Should accept or reject and why?

Reference no: EM132664359

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