You have decided to start a business. Your start up costs consists of the purchase of...

 

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You have decided to start a business. Your start up costs consists of the purchase of a capital asset for $100,000. This asset will last for 5 years at which time is will be sold for 25% of the selling price. Your revenues will be $35,000 per year except the final year where they will increase to $42,000, expenses will be $10,000 per year. Your business will require an increase of working capital of $10,000 this will be recovered when the business is sold. Vishnu Balamurugan your CFO tells you that the CCA rate is 20%, the tax rate is 30% and the cost of capital is 9%. Find the NPV for this project. You have decided to start a business. Your start up costs consists of the purchase of a capital asset for $100,000. This asset will last for 5 years at which time is will be sold for 25% of the selling price. Your revenues will be $35,000 per year except the final year where they will increase to $42,000, expenses will be $10,000 per year. Your business will require an increase of working capital of $10,000 this will be recovered when the business is sold. Vishnu Balamurugan your CFO tells you that the CCA rate is 20%, the tax rate is 30% and the cost of capital is 9%. Find the NPV for this project.

Answer rating: 100% (QA)

To calculate the Net Present Value NPV for the project we need to determine the cash flows for each year and discount them to the present value using ... View the full answer