Using the following information find the project's cash flow. Once you have that information find the NPV, PI and IRR. Cost of new equipt 7,800,000 Installation costs 200,000 Unit Sales Year Units sold 1 80,000 2 130,000 3 140,000 4 90,000 5 70,000 Sales price per unit $300 in years 1-4, $250 in year 5 Variable cost per unit $225/unit Annual fixed costs $225,000 in years 1-5 Working capital requirements: Initial working capital requirement $100,000 Each year net working capital equal to 10% of the year's sales All working capital terminated at the end of year 5 Depreciation Bonus depreciation method - all is taken in year 1 Income tax rate 21% Required rate of return 12%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Using the following information find the project's cash flow.  Once you have that information find the NPV, PI and IRR.

 

Cost of new equipt     7,800,000    
Installation costs     200,000    
           
Unit Sales Year Units sold      
  1             80,000      
  2           130,000      
  3           140,000      
  4             90,000      
  5             70,000      
           
Sales price per unit $300 in years 1-4, $250 in year 5    
Variable cost per unit $225/unit        
Annual fixed costs $225,000 in years 1-5      
           
Working capital requirements: Initial working capital requirement $100,000  
  Each year net working capital equal to 10% of the year's sales
  All working capital terminated at the end of year 5  
           
Depreciation Bonus depreciation method - all is taken in year 1  
Income tax rate 21%        
Required rate of return 12%
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