Your friend Pat calls you to see how you are doing. You tell him about your...
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Your friend Pat calls you to see how you are doing. You tell him about your big promotion and how much you love working at the company. Pat is very envious of your success, but you deserve it. You studied hard and never cheated, while Pat was continuously mischievous and never took his studies seriously. He never bought the textbook or reviewed the slides that were uploaded under Important Announcements in Moodle. You boss asks you to complete another important project. Based on the information below he wants to know what the NPV and the IRR of the project will be. The following information was made available to you in order to evaluate a project for the company's new client. Year 1 Year 2 35,000 Year 3 Year 4 Year 5 Year 6 Forecasted Unit Sold 85,000 95,000 106,000 225,000 199,000 Fixed Costs 500,000 500,000 500,000 500,000 500,000 500,000 This project will run for six years and will require an initial investment of $17,500,000 for new equipment. At the end of the six years, this equipment can be sold for $600,000. The initial working capital required will be Inventory of 4,000,000, Accounts Receivable of $1,000,000 and Accounts Payable of $3,000,000. You have contacted CRA and determined that the asset class for this equipment is Class 6 which has a CCA rate of 10%. You also confirm that the company's tax rate is 35%. The company forecasts that they can sell their new products at a price of $250, and that the variable cost of each unit sold is $140. The required rate of return for this project is 30% Your friend Pat calls you to see how you are doing. You tell him about your big promotion and how much you love working at the company. Pat is very envious of your success, but you deserve it. You studied hard and never cheated, while Pat was continuously mischievous and never took his studies seriously. He never bought the textbook or reviewed the slides that were uploaded under Important Announcements in Moodle. You boss asks you to complete another important project. Based on the information below he wants to know what the NPV and the IRR of the project will be. The following information was made available to you in order to evaluate a project for the company's new client. Year 1 Year 2 35,000 Year 3 Year 4 Year 5 Year 6 Forecasted Unit Sold 85,000 95,000 106,000 225,000 199,000 Fixed Costs 500,000 500,000 500,000 500,000 500,000 500,000 This project will run for six years and will require an initial investment of $17,500,000 for new equipment. At the end of the six years, this equipment can be sold for $600,000. The initial working capital required will be Inventory of 4,000,000, Accounts Receivable of $1,000,000 and Accounts Payable of $3,000,000. You have contacted CRA and determined that the asset class for this equipment is Class 6 which has a CCA rate of 10%. You also confirm that the company's tax rate is 35%. The company forecasts that they can sell their new products at a price of $250, and that the variable cost of each unit sold is $140. The required rate of return for this project is 30%
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1 NPV The Net Present Value NPV of the project is the sum of the present values of all future cash i... View the full answer
Related Book For
Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley
Posted Date:
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