1. Consider a capital expenditure project with an expected 5-year economic life and forecasted revenues equal to $40,000 per year; cash expenses are estimated to be $29,000 per year. The cost of the project equipment is $25,000, and the equipment’s estimated salvage value at the end of the project is $9000.The equipment’s cost will be depreciated using the straight-line method. The project requires a $7,000 working capital investment in year 0 and another $5,000 in year 1. The company’s marginal tax rate is 40%. Fill in the Initial net investment and the yearly cash flow table below
Initial Year 1 Year 2 Year 3 Year 4 Year 5
2. What is the Internal Rate of return of the Project ________________________________
3. If the firm’s cost of capital is 6.5%, what is the Net Present Value of the Project