You are currently evaluating a new project for your company. The project requires an initial investment in equipment of RM90,000 and an investment in working capital of RM10,000 at the beginning (t = 0). 

The project is expected to produce sales revenues of RM120,000 for three years. Manufacturing costs are estimated to be 60% of the revenues. The asset is depreciated over the project’s life using straight-line depreciation method. At the end of the project (t = 3), you can sell the equipment for RM10,000. The corporate tax rate is 30% and the cost of capital is 15%. 

Should you accept the project? Why?

Answer rating: 100% (QA)

Initial Investment RM90 000 RM10000 RM100000 Cash Flow for Year 1 ... View the full answer