Question: 5 . ( Worth 2 0 points ) A petroleum company is considering a new project that complements its existing business. The machine required for
Worth points A petroleum company is considering a new project that complements its existing business. The machine required for the project costs $ million. The marketing department predicts that sales related to the project will be $ million per year for the next four years, after which the market will cease to exist. The machine will be depreciated down to zero over its fiveyear economic life using the straightline method. Cost of goods sold and operating expenses related to the project are predicted to be of sales. After four years the machine can be sold for $ The petroleum company also needs to add net working capital of $ in Year when it acquires the machine. The additional net working capital will be recovered in full at the end of the projects life as opposed to the machine economic life. The corporation tax rate is The required rate of return for the petroleum company is Compute the NPV Compute the internal rate of return. Compute the profitability index. Should the petroleum company proceed with the project? Your worksheet must follow this format:tableFree Cash Flow,,,,,,
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