Project Evaluation. Revenues generated by a new fad product are forecast as follows:
| Year Don't use plagiarized sources. Get Your Custom Essay on if the opportunity cost of capital is 10 percent what is the project np f 544059 For $10/Page 0nly | 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 NPf?
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