Calculate NPV and IRR, 10 years from now, of a company's next marginal project. The project is
Question:
Calculate NPV and IRR, 10 years from now, of a company's next marginal project. The project is within the company's usual risk range. You are asked to: a) Solve for normal depreciation. b) Solve for accelerated depreciation. Consider that: 1- The expected sales for the year 2021 are UF 8,000, and are expected to grow 2% every year. 2- The expected annual variable costs are 65% of sales, and are expected to grow at the rate of sales. 3- In fixed assets, the initial investment would reach UF 8,000, which have a useful life of nine years, and which will depreciate rapidly by one third of the normal useful life. 4- Working capital corresponds to 30% of annual variable costs. 5- Fixed costs reach UF 900 annually and constantly. 6- The estimated scrap value of fixed assets is 10% at the end of 10 years, but their residual tax value is zero. 7- The income tax rate is 27%. 8- The capital cost of this project is 14.46%
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta