A company is considering a new venture

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Reference no: EM1388205

A company is considering a new venture. This venture will require the purchase of $550,000 of equipment (which will be depreciated straight-line to zero over the life of the project and will have no salvage value), and working capital will increase by $50,000. Expected sales are $850,000 with costs of $640,000. The project will last for five years, be taxed at 35% and have a required rate of return of 14%. What is the net present value of the project? You will have to perform a pro forma income statement to get OCF.

Answer: $26,758

After doing the pro-forma I came up with NI-65000 OCF-175,000. I inputted everything into the calculator but I'm obviously messing up somewhere since I'm not getting the correct answer. Help!?

I did CFo= -600,000
CF1=175,000
CF2=175,000
CF3=225,00 (also tried 125,000)
I=14%

Reference no: EM1388205

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