What is the npv and irr of this project

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You are looking at a 5yr project at your company that is expected to generate 75K (unit) sales in the first year, and 25K extra every year thereafter until year 5. The initial price will be $11, and you plan to increase the price by $1 at the end of every year.

In terms of costs, you were able to secure a contract with a parts supplier for $5 per unit.

Additionally, you think the costs of running your operation will be $250K per year (fixed) and about $1 per unit. To this end, you need to purchase assets in the total amount of $600K, which will depreciate completely in a straight line manner.

What is the NPV and IRR of this project? Assume a tax rate of 40% and a discount rate of 20%.

Reference no: EM131971934

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