In: Finance
The company is going to analyse a new investment project, which has the following characteristics:
Unit price $5.00
Annual unit sales 40,000
Variable cost per unit $2.5
Investment into new machinery (t=0) $400,000
Investment in working capital $50,000 (fully recovered at the end of project)
Project life 6 years
Annual depreciation $60,000
Market value of machinery (t=6) 80,000
Tax rate 40 % (the same for profits and capital gains)
Required rate of return (WACC) 10 %
Marketing research expense $16,000 (the research was done earlier this year)
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