Compute the net present value internal rate of return and


Aunt Sally's Sauces, Inc. is considering expansion into a new line of organic tomato sauces Sally has paid exist50,000 for a marketing study, which indicates that the new product line would have sales of exist650,000 per year for each of the next 5 years. New plant and equipment will cost exist500,000 and will be depreciated using MACRS over a 5 year class life. The plant and equipment will have a market value of exist50,000 at the end of 5 years. Annual fixed operating costs are projected at exist80,000 and variable costs are projected at 60% of sales. The project requires a exist75,000 increased investment in net working capital at the beginning of the project: the outlay for net working capital will be recovered at the end of 5 years. Aunt Sally's tax rate is 34% and the firm requires a 16% return. Compute the net present value, internal rate of return, and profitability index for the new product line.

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Financial Management: Compute the net present value internal rate of return and
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