Reference no: EM131707010

The following are the final values to the data that you have been estimating up to this point:

You can borrow funds from your bank at 3%.

The cost to install the needed equipment will be $105,000 and this cost is incurred prior to any cash is received by the project.

The gross revenues from the project will be $25,000 for year 1, then $27,000 for years 2 and 3. Year 4 will be $28,000 and year 5 (the last year of the project) will be $23,000.

The expected annual cash outflows (current project costs) are estimated at being $13,000 for the first year, then $12,000 for years 2, 3, and

4. The final year costs will be $10,000.
Your tax rate is 30% and you plan to depreciate the equipment on a straight-line basis for the life of the equipment.

After 5 years the equipment will stop working and will have a residual (salvage) value of $5,000).

The discount rate you are assuming is now 7%.

Perform the final NPV calculations and provide a narrative of how you calculated the computations and why.

Then provide a summary conclusion on whether you should continue to pursue this business opportunity.

Research, using at least three sources other than the textbook materials that support your calculations and conclusions.