Question 1 A company has to decide whether to select a project or not. The following information are provided: The cost of the capital expenditure involved is $55,500 Discount rate of the project is 12%, Company will have to spend $8,500 on net working capital that will be returned to him at the end of the project He will depreciate his capital expenditure using straight line method over the project life. . The duration of the project is 5 years. Tax rate of the project is 28% His accountant has forecast a revenue of $ 21,000 annually. . Further information is provided: Supplies expense S800 Supplies S1300 Salary expenses S1400 Unearned Revenue Is6100 Utilities S 1050 Rental expenses S950 Prepaid Rent S1500 At the end of the project he will sell the equipment purchased initially [CAPEX) at 5000 The salvage value of CAPEX is S7500 REQUIRED a Calculate the initial investment b) Calculate each year cash flow Calculate the terminal value of the asset used 2) Calculate the NPV c) Calculate the Profitability Index [PI] d) Calculate IRR of the project Question 1 A company has to decide whether to select a project or not. The following information are provided: The cost of the capital expenditure involved is $55,500 Discount rate of the project is 12%, Company will have to spend $8,500 on net working capital that will be returned to him at the end of the project He will depreciate his capital expenditure using straight line method over the project life. . The duration of the project is 5 years. Tax rate of the project is 28% His accountant has forecast a revenue of $ 21,000 annually. . Further information is provided: Supplies expense S800 Supplies S1300 Salary expenses S1400 Unearned Revenue Is6100 Utilities S 1050 Rental expenses S950 Prepaid Rent S1500 At the end of the project he will sell the equipment purchased initially [CAPEX) at 5000 The salvage value of CAPEX is S7500 REQUIRED a Calculate the initial investment b) Calculate each year cash flow Calculate the terminal value of the asset used 2) Calculate the NPV c) Calculate the Profitability Index [PI] d) Calculate IRR of the project