Reference no: EM132465574

SS, Inc. is considering investment in a machine to produce computer keyboards. The price of the machine is $400,000 and its economic life is five years. The machine will be depreciated to a value of zero over the five-year period. The machine will produce 10,000 units of keyboards each year. The price of the keyboards is $40 in the first year. It will increase at 5 percent per year. The production cost per unit of the keyboard is $20 in the first year, and it will increase at 10 percent per year. Corporate tax rate is 34%. The discount rate is 15 percent.

Working capital requirements:  Change in NWC over the previous year

Year 0      $10,000         +$10,000

Year 1       20,000         +$10,000

Year 2       30,000         +$10,000

Year 3       40,000         +$10,000

Year 4       30,000         -$10,000

Year 5       30,000   

Estimate the total cash flows and find out the NPV, IRR, and PI of this project.