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Tatsumi Inc. has just completed development of a new printer. The new product is expected to produce annual revenues of $4,050,000. Producing the printer requires an investment in new equipment costing $4,320,000. The printer has a projected life cycle of 5 years. After 5 years, the equipment can be sold for $540,000. Working capital is also expected to decrease by $540,000, which Tatsumi will recover by the end of the new product's life cycle. Annual cash operating expenses are estimated at $2,430,000. The required rate of return is 8%.

Required:

1. Prepare a schedule of the projected annual cash flows.

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Year Item 0 Equipment Working capital Total 1-4 Revenues 5 Operating expenses Total Revenues Operating expenses Salvage Recovery of working capital Total 40 Cash Flow -4,320,000 540,000 -4,860,000 4,050,000 2,430,000 1,620,000 4,050,000 2,430,000 540,000 540,000 ✓ 2,700,000 ✓ 2. Calculate the NPV using only discount factors from Exhibit 128.1 3. Calculate the NPV using discount factors from both Exhibits 128.1 and 128.2 Year Item 0 Equipment Working capital Total 1-4 Revenues 5 Operating expenses Total Revenues Operating expenses Salvage Recovery of working capital Total 40 Cash Flow -4,320,000 540,000 -4,860,000 4,050,000 2,430,000 1,620,000 4,050,000 2,430,000 540,000 540,000 ✓ 2,700,000 ✓ 2. Calculate the NPV using only discount factors from Exhibit 128.1 3. Calculate the NPV using discount factors from both Exhibits 128.1 and 128.2

Answer rating: 100% (QA)

To calculate the net present value NPV of the project using the provided discount factors from Exhib... View the full answer