What is the base-case npv

Reference no: EM133331622

Questions: IKEO Corporation has purchased a new high technology machine for the manufacturing of its book rack at a cost of RM500,000. The economic life of the machine is 5 years, depreciated using straight-line method with no salvage value. The sales price for each book rack is RM75, the variable cost per unit is RM30 and the relevant fixed costs amount to RM300,000. If the tax rate is 25% and the appropriate discount rate is 6.5%, what is the financial break-even point?

b) Solid Corporation is planning to manufacture a new heavy-duty industrial floor cleaner. The company's management has estimated that it can sell 30 units per year at RM120,000 net cash flow per unit for the next 5 years. The initial investment involved in developing the machine is RM14.5 million and the appropriate discount rate is 8.5%.

i) What is the base-case NPV

) ii) After the first year, the project can be dismantled and it will have an after-tax salvage value of RM10.5 million. In addition, after the first year, expected cash flows will be revised up to 50 units per year or down to 0 units with equal probability. Calculate the revised NPV

Reference no: EM133331622

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