Question: The following data is collected to prepare feasibility study for an investment project:

Investment cost LE 40 million will be paid during two establishment years (22 million in the first year and 18 million in the second year).

Operating periods 4 years

The current operating costs of is LE 16 million (include LE 5 million depreciation).

Annual sales revenues LE 20 million.

Residual value 50% of the Investment cost (=40*50%=20).

The income tax rate is 20% and the discount rate is (cost of capital)

Required:

l- Compute cash flow.

2- Compute payback period, NPV, PI and determine whether the project is accepted or rejected.