A firm is undertaking a project with the following details provided.
-The project costs $2.5 million and has a five-year service life.
-The project is classified under a seven year property under the MACRS rule.
-At the end of the fifth year, any assets held for the project will be sold. The expected salvage value will be 10% of the initial project cost.
-The firm will finance 40% of the project money from an outside source with an interest rate of 10%. The firm is required to repay the loan with five equal annual payments.
-The firm’s incremental marginal tax rate is 35%
-MARR is 15%
-Given the information,
Determine the end of year cash flows for years 0 through 5?
Compute the Net Present Worth for this 5-year project?
Please show work