Question: You are considering a year project that requires upfront investment in a piece of production machinery to serve increased market demand for protective gear. The

 You are considering a year project that requires upfront investment in

You are considering a year project that requires upfront investment in a piece of production machinery to serve increased market demand for protective gear. The equipment investment is $6200 and it is depreciated straight line to 20% of its initial cost by the end of the project in year 4. Product revenues from the sale of the gear are forecasted below, and project operating costs should be o of sales Year 1 2 3 4 Project Sales (5) 7200 7400 7600 000 The project will also require 1600 in networking capital investment to start and a further 5200 in networking capital investment will take place in your 1. The projects networking capital will be reduced to zero at the end of the project in four years, the equipment will be sold at the salvage value which is 20% of its initial con. The relevant tax rate is 30% and the required return is 15h. Use the above information to answer the following questions a) What is the Project cash OUTFLOW at time rero. Include all contributions DO NOT enter your answer with a negative sign bj What is the forecasted operating cash flow (OCF) in year 2? What is the forecasted Total Project Cash Flow in year 47 d) Using the relevant discount rate gven above what is your estimate for the NPV of the project Enter your answer to two decimal places with a sign and do not use a comma 6) Should the project be accepted? (Enter Yes or No)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!