Your company is considering a new production system that will initially cost $1 million. 

It will save $300,000 a year in inventory and receivables management costs. 

The system is expected to last for five years and will be depreciated at a CCA rate of 20%. 

The system is expected to have a salvage value of $50,000 at the end of year 5. 

There is no impact on net working capital. 

The marginal tax rate is 40%. 

The required return is 8%. 

 

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Based on these preliminary project estimates, what is the NPV of the project? What is the IRR? Based on these preliminary project estimates, what is the NPV of the project? What is the IRR?

Answer rating: 100% (QA)

To calculate the NPV Net Present Value of the project and the IRR Internal Rate of Return we need to ... View the full answer