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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Project Evaluation. Revenues generated by a new fad product are forecast as follows:
|
Year |
Revenues |
|
1 |
$40,000 |
|
2 |
30,000 |
|
3 |
20,000 |
|
4 |
10,000 |
|
Thereafter |
0 |
Expenses are expected to be 40 percent of revenues, and working capital required in each year is expected to be 20 percent of revenues in the following year. The product requires an immediate investment of$50,000 in plant and equipment.
a. What is the initial investment in the product"! Remember working capital.
b. If the plant and equipment are in an asset class that has a CCA rate of 25 percent, and the firm’s tax rate is 40 percent, what are the project cash flows in each year?
c. If the opportunity cost of capital is 10 percent, what is the project NP\f?
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