ABC Inc is considering a new capital budgeting project that will last for 3 years. Initial investment outlay for the project equipment is expected to be $110,000. The equipment will be straight-line depreciated over 3 year period. The expected market value of project assets is forecasted to be $50,000 when the project is liquidated at the end of the 3rd year. Project will require $5,000 net working capital investments in years 1 and 2. ABC Inc’s cost of capital is 12% and the project does not have a distinct risk profile.
Based on extensive research, analysts have prepared the following incremental cash flows:

1. The end of year 1 after tax project cash flow is?
2. The after tax project cash flow including the terminal cash flow for the project in year 3 is?
3. The NPV for ABC Inc’s project is?
4. The IRR for the projectis?

  • CreatedSeptember 19, 2013
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