Revenues generated by a new fad product are forecast

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Reference no: EM13915321

Revenues generated by a new fad product are forecast as follows:

Year: Revenues:

1 $54,000

2 $30,000

3 $20,000

4 $10,000

Thereafter 0

Expenses are expected to be 50% of revenues, and working capital required in each year is expected to be 10% of revenues the following year. The product requires an immediate investment of $50,000 in plant and equipment. The initial investment in the product is $55,400.

If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight line depreciation, and the firm's tax rate is 30%, what are the projected cash flows in each year? (Assume the plant and equipment are worthless at the end of 4 years.

Cash Flow Year 1: ?

Cash Flow Year 2: ?

Cash Flow Year 3: ?

Cash Flow Year 4: ?

If the Opportunity cost of capital is 12%, what is the projects NPV? (Do not round intermediate calculations. Round your answer to 2 decimal places)

NPV: ?

What is project IRR? (Do not round intermediate calculations. Round your answer to 2 decimal places)

IRR % is: ?

Reference no: EM13915321

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