Solution-What is the initial investment in the product

What is the initial investment in the product

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Reference no: EM132483850

Year	Revenues
1	$44,000
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 20% of revenues in the following year. The product requires an immediate investment of $48,000 in plant and equipment.

Required:

Question a. What is the initial investment in the product? Remember working capital.

Question b. 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 40%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years.

20800

15800

12800

9800

Question c. If the opportunity cost of capital is 15%, what is the project's NPV?

Question d. What is project IRR?

Reference no: EM132483850

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What is the initial investment in the product

Reference no: EM132483850

Reference no: EM132483850

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