Project requires an initial investment in equipment

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Reference no: EM13951414

You are currently evaluating a new project for your company. The project requires an initial investment in equipment of RM90,000 and an investment in working capital of RM10,000 at the beginning (t = 0). The project is expected to produce sales revenues of RM120,000 for three years. Manufacturing costs are estimated to be 60% of the revenues. The asset is depreciated over the project’s life using straight-line depreciation method. At the end of the project (t = 3), you can sell the equipment for RM10,000. The corporate tax rate is 30% and the cost of capital is 15%. Should you accept the project? Why?

Reference no: EM13951414

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