1. You are considering a new product. Machinery and equipment will cost $60,000 if bought today and it will be depreciated straight line to zero over the next three years. In addition, you will require a working capital of $15,000 immediately to get the product to the market next year. The new product is expected to generate revenue of $100,000 per year for the next 3 years. Project operating costs will be $40,000 per year. At the end of the three years, you will recover your initial working capital. Taxes will be 40% and the project's risk level is specified to be high and thus you assign a required return of 11% to it.

Calculate:

1. Payback period
2. NPV
3. IRR

Answer rating: 100% (QA)

To calculate the payback period NPV Net Present Value and IRR Internal Rate of Return for the given project we need to consider the cash flows for each year and discount them appropriately Lets break ... View the full answer