Npv-irr-payback and profitability index


Phone Home, Inc. is considering a new 4-year expansion project that requires an initial fixed asset investment of $3 Million. The fixed asset will be depreciated using the three year MACRS after which time it will have a market value (salvage value) of $231,000. The project requires an initial investment in net working capital of 330,000 and no additional net working capital throughout the project. The project is estimated to generate 2,640,000 in annual sales, with costs of 1,056,000. The tax rate is 30 % and the required return for the project is 15%. What is NPV, IRR, Payback, and Profitability Index for this project?

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Finance Basics: Npv-irr-payback and profitability index
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