Question: what is the projects net present value assuming discount rate of 12%? what is projects IRR? A new project is expected to have an 10-year
A new project is expected to have an 10-year economic life. The project will have an initial cost of $125,000. Installation and shipping charges for the equipment are estimated at $10,000. The equipment will be depreciated using straight-line depreciation. An initial working capital investment of $25,000 is required to undertake the project. The revenues from the project in year 1 are expected to be $50,000. These revenues are expected to increase at a rate of 8%, each year. Operating costs (excluding depreciation) are $18,000, and are expected to increase at a rate of 6%, each year. The firm's marginal tax rate is 40 percent. The expected salvage value at the end of year 10 is $0
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