Year0123cash flow-26000110001400010000IRR RuleIRRRecommendation:16,69%The IRR is greater compared to the required return, and as such the project should beNPV ruleNPV at 11% required rate of returnNPVRecommendation:$2.584,54At a required return of 11%, the project has a postive NPV indicating a net profit.Thus, the project should be accepted.NPV at 24% required rateNPVRecommendation:$(2.779,06)At a required return of 24%, the project has a negative NPV indicating that it will resAs such, the project should not be approved.s such the project should be accepted.PV indicating that it will result to a lose.SolutionPro forma Income StatementSales635000Variable costs279400Fixed costs193000Depreciation54000Income before tax108600Tax deduction38010Net Income70590SolutionInstallation costsNet working capitalTotal initial investmentDepreciationTax saving on depreciationAnnual savingsAfter tax savingsTotal annual cash flowsSalvage valueAfter tax salvage valueTerminal cash flow for year 5Discount rateNPV calculationsYear$$$$$$$$540.000,0029.000,00569.000,00108.000,0036.720,00170.000,00112.200,00148.920,0080.00052800$ 230.720,0010%012345NPVCash flows$ (569.000,00)$ 148.920,00$ 148.920,00$ 148.920,00$ 148.920,00$ 230.720,00$46.315,33Solutiona.b.Variable material cost per unitVariable labor costVariable cost per unit$$$9,648,6318,27Total fixed costNu ...
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