Reference no: EM132569880

The cost of the equipment will be $70,000 and this cost is incurred prior to any cash is received by the project.

• The expected annual cash revenue of the project will be $30,000.
• The expected annual cash outflows (expenses/costs) are estimated at being $11,000, excluding depreciation.
• Your tax rate is 30% and you plan to depreciate the equipment on a straight-line basis for the life of the equipment. The discount rate you are assuming is 6%.
• After 5 years the equipment will stop working and there will be no salvage value.

Provide the final, accurate NPV calculations.

Question 1: A narrative on how the NPVs were calculated. The narrative should include how the data relating to depreciation and its tax consequences affect the cash flow of the project. Include a table with your analysis to present your work.

Question 2: Provide a conclusion on whether this business opportunity should be pursued.