Revenues generated by a new fad product are forecast as follows Year 1 - $56000 Year 2 - $40000 Year 3 - 30000 Year 4 - 20000 thereafter 0 Expenses are expected to be 50% of revenues, and the working capital required each year is expected to be 20% of revenues in the following year. the product requires an immediate investment of $60000 in plant and equipment 1. What is the initial investment in the product? remember working capital 2. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation and the firm's tax rate is 40% what is the project each flows in each year? assume the plant and equipment are worthless at the end of 4 years 3. If the opportunity cost of capital is 12% what is the project's NPV What is the project IRR?
Revenues generated by a new fad product are
Year 1 - $56000
Year 2 - $40000
Year 3 - 30000
Year 4 - 20000
thereafter 0
Expenses are expected to be 50% of revenues, and the working capital required each year is expected to be 20% of revenues in the following year. the product requires an immediate investment of $60000 in plant and equipment
1. What is the initial investment in the product? remember working capital
2. If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight-line depreciation and the firm's tax rate is 40% what is the project each flows in each year? assume the plant and equipment are worthless at the end of 4 years
3. If the
What is the project IRR?
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