The following information is for a proposed project that will provide the capability to produce a specialized product estimated to have a short market life.Capital investment is $1,000,000Cost of depreciable property which is part of $1,000,000 total estimated project cost is $650,000Depreciable property is categorized in CCA 30% class with 50% rule applicable.Project analysis period is 3 yearsAnnual operating and maintenance expenses are $636,000 in first year and increase at 5% rate per yearCompany expects to make $1,250,000 of revenue from sales of new productSalvage value of depreciable property at end of 3 years is $280,000Corporate taxes are 40%MARR is 15% per yearCalculate a 3-year cash flow statement then calculate using excel,Net Present Value of the projectIRR

Capital budgeting techniques are commonly used at a large scale by companies to identify the…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following information is for a proposed project that will provide the capability to produce a specialized product estimated to have a short market life.

Capital investment is $1,000,000
Cost of depreciable property which is part of $1,000,000 total estimated project cost is $650,000
Depreciable property is categorized in CCA 30% class with 50% rule applicable.
Project analysis period is 3 years
Annual operating and maintenance expenses are $636,000 in first year and increase at 5% rate per year
Company expects to make $1,250,000 of revenue from sales of new product
Salvage value of depreciable property at end of 3 years is $280,000
Corporate taxes are 40%
MARR is 15% per year

Calculate a 3-year cash flow statement then calculate using excel,