What are npv and irr

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A product line can sell 80.000 products per year for 4 years (after which time this project is expected to shut down). The product will sell for $5 each, with variable costs of $3 for each one produced, while annual fixed costs associated with production will be $70,000. In addition, there will be a $250.000 initial expenditure associated with the purchase of new production equipment. It assumed that this initial expenditure will be depreciated using the SL method down to zero over 4 years .This project will also require a one-time initial investment of $30.000 in net working capital associated with inventory. The required rate of return is 10%. Tax rate is 40%. What are the NPV and IRR? Do you accept the project? why?

Reference no: EM131550936

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