You are evaluating a project for your company. The project will require equipment that has a...

You are evaluating a project for your company. The project will require equipment that has a purchase price of $500,000, and will need to include $60,000 for delivery costs and $70,000 for installation related expenses. The equipment will be depreciated using MACRS as a 10 year class asset. Assume you expect a salvage value of $50,000 at the end of the projects life. In addition, land will need to be purchased for $1,500,000. The land is expected to increase in value by 5% per year over the life of the project, and will be sold at the end of the project’s life. Net working capital of $150,000 will be needed for the project, and will be returned at the end of the project’s life. The project has a useful life of 15 years.

The project will generate revenues of $900,000 each year, and have cash operating expenses of $550,000. The tax rate for ordinary income is 40%, and the tax rate for capital gains is 20%. The required rate of return is 12%. What is the NPV for the project? Also, calculate the IRR, MIRR, Profitability Index, and Payback for this project.

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jeff jeffy answered 1 year ago

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