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.The cost of depreciable property, which is part of the $1,000,000 total estimated project cost, is $650,000.The depreciable property is categorized in CCA 30% class, with 50% rule applicable.The project analysis period is 3 years.Annual operating and maintenance expenses are $636,000 in the first year, and then increase at the rate of 5% per year.The company expects to make $1,250,000 of revenue from the sales of the new product.Estimated salvage value of depreciable property at the end of three years is $280,000.Corporate taxes are 40%MARR is 15% per year.Solve the question on Exel.Calculate a 3-Year cash flow statement for the project, and then calculate the following two questions listed below using Excel:The Net Present Value of the projectThe IRR of the project

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

Solve the question on Exel.

Calculate a 3-Year cash flow statement for the project, and then calculate the following two questions listed below using Excel:

The Net Present Value of the project
The IRR of the project

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