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What are the associated cash flows for the project

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Question - A company is able to sell 50 000 cans of deodorant per year for the next three years at a price of R4.00 per can. The variable cost per unit is R2.50 while it required R50 000 in research and development to develop the product. The fixed costs associated with the project are R12 000 while the equipment will cost R90 000 including installation costs. An initial outlay of R20 000 will be required for working capital. The equipment will be depreciated using the straight line method over three years and has a salvage value of R20 000. The company's tax rate is 40% while the cost of capital is 20%.

Required -

1. What are the associated cash flows for the project?

2. Calculate the payback period, accounting rate of return, IRR, NPV and profitability index associated with the project.

Reference no: EM133189113

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