Illustrate what is the initial investment in the product

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Reference no: EM13100898

Q. Project Evaluation. Revenues generated by a new fad product are forecast as follows:

YearRevenues
1$40,000
230,000
320,000
410,000
Thereafter0

Expenses are expected to be 40 percent of revenues and working capital required in each year is expected to be 20 percent of revenues in the following year. The product requires an immediate investment of $50,000 in plant and equipment.

Illustrate what is the initial investment in the product? Remember working capital. If the plant and equipment are an asset of class that has a CCA rate of 25 percent and the firm's tax rate is 40 percent, illustrate what is the project cash flows in each year? If the opportunity cost of capital is 10 percent, illustrate what is project NPV?

Reference no: EM13100898

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