I’m looking at a project that involves buying a machine for S$4,000,000 today (Year 0). It’s expected to bring in cash flows of S$1,332,000, S$932,000, S$1,258,000, and S$1,540,000 over the next four years, starting from Year 1. Since the product has a short lifecycle, it’ll be phased out after four years, and the machine will have no resale value at that point. With a tax rate of 17.5% and an expected return rate of 10.87%, management aims to recover the investment within four years. Could you help me calculate the NPV and determine if this project would be a good idea? Also, based on this setup, would you say that the IRR of this project is likely higher, lower, or about the same as the expected rate of return, and why?
I’m looking at a project that involves buying a machine for S$4,000,000 today (Year 0). It’s expected to bring in cash flows of S$1,332,000, S$932,000, S$1,258,000, and S$1,540,000 over the next four years, starting from Year 1. Since the product has a short lifecycle, it’ll be phased out after four years, and the machine will have no resale value at that point. With a tax rate of 17.5% and an expected return rate of 10.87%, management aims to recover the investment within four years.
Could you help me calculate the NPV and determine if this project would be a good idea? Also, based on this setup, would you say that the IRR of this project is likely higher, lower, or about the same as the expected
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