Reference no: EM132664401

Your company has asked you to do preliminary analysis on a new four-year project. The project would increase projected sales by $125,000 each year for four years. The project would have annual costs of $70,000 and require the purchase of a piece of equipment for $47,200. The company uses straight line depreciation and the equipment would have zero value at the end of the project.

(For this question, you must use a separate piece of paper to show your work for each part of this question. You must draw a timeline of the cashflows for part c which asks for NPV. The last question on this exam will ask you to take a picture of your work an upload it.)

Format your answers to the nearest penny (or two places past decimal), with a dollar sign or percent sign, and with a comma when appropriate.

1) Assuming a tax rate of 21%, calculate net income.

2) Calculate the Operating Cash Flow for the project.

3) Assuming the project has an initial cost of $140,000 and lasts four years, calculate the NPV of the project assuming a required rate of return of 9.5%. (Draw a timeline of the cashflows.)

4) Calculate the Internal Rate of Return on the project.