Question: kindly solve this question step by step and hand written Cash Flow Estimation SNG, Inc. projects unit sales for its new plant as follows: 15
Cash Flow Estimation SNG, Inc. projects unit sales for its new plant as follows: 15 Marks Years Demand Sale Price / unit 1 60,000 420 2 69,000 480 3 75,000 520 4 80,000 648 5 100,000 720 Production of the implants will require 8 million in net working capital to start and additional net working capital investments each year equal to 20 percent of the projected sales increase for the following year. Total fixed costs are 0.5 million per year, variable production costs are $250 per unit in the first year of operations and it will increase by 7% every year till end of project. The equipment needed to begin production has an installed cost of 12 million. Depreciation will be charged straight line to zero basis. In five years, this equipment can be sold for about 25 percent of its acquisition cost. SNG is in the 30 percent marginal tax bracket and has a required return on all its projects of 15 percent. Based on these preliminary project estimates, what is the NPV of the project? What is the IRR
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