Robert & John are considering investing in a printing business. They will need to acquire equipment for $150,000, which they will depreciate on a straight line schedule during the life of the project (5 years), and will be able to sell for $25,000 at that time.  They estimate to have revenues of $82,000 for the first year that will increase by 5% every year. Their costs are: Rent $3,000 per month; supplies $3,000; payroll, $6,000; and other expenses $2,000. They also estimate they need to have $10,000 as a working capital, to manage additional expenses, which they can recover the last year of the project. They are in a 28% tax rate, and consider that 12% is the appropriate discount rate to use. You are asked to give them advice on this investment opportunity. Is the investment good? Calculate NPV and IRR to justify your advice.
Use the following table for calculations and show it on excel

	0	1	2	3	4	5
Revenues
Costs
Depreciation
Before Tax Profits
Taxes @ 28%
After Tax Profits
Cash Flow
Net After Tax Income
+ Dep
- WC
After Tax Salvage Value
Initial Investment
Net Cash Flow

Answer rating: 100% (QA)

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