Reference no: EM132593717
Question - Calculate the payback period (P/B) and the net present value (NPV) for the project
Expected sales are $800,000 for the first 5 years.
Direct costs, including labor and materials, will be 50% of sales.
Indirect costs are estimated at $200,000 a year.
The cost of the building for the new café will be a total of $850,000, which will be depreciated straight line over the next 5 years.
The firm's marginal tax rate is 38%, and its cost of capital is 10%.
Answer the following questions based on your P/B and NPV calculations:
Do you think the project should be accepted? Why?
Define and describe net present value (NPV) as it pertains to the new cafe.
Assume the company has a P/B (payback) policy of not accepting projects with a life of over 3 years. Do you think the project should be accepted? Why?
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: Calculate the payback period (P/B) and the net present value (NPV) for the project - Expected sales are $800,000 for the first 5 years
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