Consideration is being given to the investment of $420,000 at time zero for machinery and equipment to be depreciated using 7 year straight line depreciation starting in year 1 with the half-year convention. Annual sales are projected to be $450,000 less annual operating costs of $200,000. Escalation of operating costs and sales revenue is expected to be a washout from year to ear. $100,000 for working capital investment is also needed at time zero and working capital return is expected to equal the initial working capital investment at the end of the project. Salvage value of the machinery and equipment is expected to be zero. The minimum DCFROR is 15% and the effective income tax rate is 35%. Calculate DCFROR and NPV for an 18-year evaluation life.
A) DCFROR=34.29%; NPV=565.55
B) DCFROR=32.29%; NPV=448.37
C) DCFROR=32.41%; NPV=565.55
D) DCFROR=34.29%; NPV=448.37