What is the npv of the proposed product line investment

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Magsaysay Corporation is considering an investment in a new product line. The investment would require an immediate outlay of P100,000 for equipment and an immediate investment of P200,000 in working capital. The investment is expected to generate a net cash inflow of P100,000 in year 1, P150,000 in year 2, and P200,000 in years 3 and 4. The equipment would be scrapped (for no salvage) at the end of the fourth year, and the working capital would be liquidated. The equipment would be fully depreciated by the straight-line method over its fouryear life.

Question 1) Refer to Magsaysay Corporation. If Magsaysay uses a discount rate of 16 percent, what is the NPV of the proposed product line investment? Please Indicate if the project should be accepted or not.

Question 2) Refer to Magsaysay Corporation. What is the payback period for the investment?

Reference no: EM132632665

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