business is evaluating a project for which the following information is relevant: I. Sales will be TZS100,000,000 in the first year and are expected to increase by 5% per year. II. Costs will be TZS 50,000,000 and are expected to increase by 7% per year. III. Capital investment will be TZS 200,000,000 and attracts tax allowable depreciation of the full value of the investment over the 5 year length of the project. IV. The tax rate is 30% and tax is payable in the following year. V. Working Capital invested will be 20% of projected sales for the following year. VI. The discount rate of 12%. REQUIRED: Calculate the NPV for the project.
business is evaluating a project for which the following information is relevant: I. Sales will be TZS100,000,000 in the first year and are expected to increase by 5% per year. II. Costs will be TZS 50,000,000 and are expected to increase by 7% per year. III. Capital investment will be TZS 200,000,000 and attracts tax allowable depreciation of the full value of the investment over the 5 year length of the project. IV. The tax rate is 30% and tax is payable in the following year. V. Working Capital invested will be 20% of projected sales for the following year. VI. The discount rate of 12%. REQUIRED: Calculate the NPV for the project.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 1E: A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash...
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Transcribed Image Text:business is evaluating a project for which the following information is relevant:
I. Sales will be TZS100,000,000 in the first year and are expected to increase by 5% per year.
II. Costs will be TZS 50,000,000 and are expected to increase by 7% per year.
III. Capital investment will be TZS 200,000,000 and attracts tax allowable depreciation of the full value of the
investment over the 5 year length of the project.
IV. The tax rate is 30% and tax is payable in the following year.
V. Working Capital invested will be 20% of projected sales for the following year.
VI. The discount rate of 12%.
REQUIRED: Calculate the NPV for the project.
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