Determine the npv and irr of the project

Reference no: EM13199121

Texas Roks, Inc. is considering a new quarry machine. The costs and revenues associated with the machine have been provided to you for analysis:

Cost of the new project	$4,000,000
Installation costs	$100,000
Estimated unit sales in year 1	$50,000
Estimated unit sales in year 2	$75,000
Estimated unit sales in year 3	$40,000
Estimated sales price in year 1	$150
Estimated sales price in year 2	$175
Estimated sales price in year 3	$160
Variable cost per unit	$120
Annual fixed cost	$50,000
Additional working capital needed	$435,000
Depreciation method	3 years straight-line method, no salvage value
Texas Rok's tax rate	40%
Texas Rok's cost of capital	13%

Required:

Calculate operating cash flow and the change in net working capital.
Determine the NPV and IRR of the project.
Should the company accept or reject the project based on the NPV? Why?
Should the company accept or reject the project based on the IRR? Why?
What is your final accept or reject decision? Why?
What is the payback period for this project? Would this influence your decision to accept or reject?

Reference no: EM13199121

Questions Cloud

How much money will be in the savings account : A person deposited $500 in a savings account that pays 5% annual interest that is compounded yearly. At the end of 10 years, how much money will be in the savings account?

What are the minerals found in the sand at napoopoo beach : What are the minerals found in the sand at Napoopoo Beach, Hawaii? Or does anyone have any links that may help me find out?

How much will it cost to build a 90 foot tower : That is, the next 10 feet will cost $125, the next 10 feet will cost $150, etc. How much will it cost to build a 90 foot tower?

Find the width w of a flat metal sheet : Verify that the sine curve has equation y=sin(πx/7) and find the width w of a flat metal sheet that is needed to make a 28 in panel.

Determine the npv and irr of the project : Calculate operating cash flow and the change in net working capital and determine the NPV and IRR of the project.

Define effect of the buisiness cycle on the multiplier : Effects of wage stickiness and the shape of the aggrate supple curve,effect of expectations on aggragate demand. Phillips Curve, natiral rate of unemployment, expacted inflation , the relationshipe between AS-Ad and the Phillipe Curve.

Main effects created by hildegard’s visions : What are the main effects created by Hildegard’s visions? How does she achieve these? How would you depict them in paintings or film?

Increasing in excise tax affect the supply : How does an increase in an excise tax on cars affect the supply of cars. more cars will be made or fewer cars will be made or else.

Find a linear function for the cost : Find a linear function for the cost, C , of waste collection as a function of the number of kilograms of waste, w.

User Account

All Pages