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Evaluate the project only for 4 years

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Suppose ABC firm is considering an investment that would extend the life of one of its facilities for 4 years. The project would require upfront costs of $5.02M plus $24.05M investment in equipment. The equipment will be obsolete in (N+2) years and will be depreciated via straight-line over that period (Assume that the equipment can't be sold). During the next 4 years, ABC expects annual sales of 70M per year from this facility. Material costs and operating expenses are expected to total 38M and 9.06M, respectively, per year. ABC expects no net working capital requirements for the project, and it pays a tax rate of 39%. ABC has 79% of Equity and the remaining is in Debt. If the Cost of Equity and Debt are 15.86% and 6.34% respectively, compute the NPV (Evaluate the project only for 4 years)

Reference no: EM132816095

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