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Finance Assignment | Top Essay Writing

The company is considering a five-year project that will require $680,000 for new manufacturing equipment that will be depreciated straight-line to a zero-book value over five years (depreciation rate is 20% per year). At the end of the project, the equipment can be sold for 15 percent of its original cost.

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The project requires an initial investment in net working capital of $90,000 (all of which will be recovered at the end of the project). The project is expected to generate annual sales of $845,000 with annual costs of $545,000. The tax rate is 25 percent and the required rate of return is 17.5 percent.

Instructions: Complete the pro forma and determine total cash flows for each year of the project’s life. Calculate initial outlay (total cash flow in Year 0), after-tax salvage value in Year 5, and NPV of the project. Explain your decision whether you recommend to accept or reject the project. Get Finance homework help today

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