Assignment: NPV Calculations
The following are the values to the data:
1. The cost of the equipment will be $70,000 and this cost is incurred prior to any cash is received by the project.
2. The expected annual cash revenue of the project will be $30,000.
3. The expected annual cash outflows (expenses/costs) are estimated at being $11,000, excluding depreciation.
4. Your tax rate is 30% and you plan to depreciate the equipment on a straight-line basis for the life of the equipment. The discount rate you are assuming is 6%.
5. After 5 years the equipment will stop working and there will be no salvage value.
Requirements of the paper:
1. Perform the final NPV calculations and provide a narrative on how you calculated the computations and why (justification of answer).
2. Present your calculated answers in schedule format (a table) along with your narrative. Microsoft Excel is also recommended for calculating and creating a table (your schedule).
3. Then provide a summary conclusion on whether you should continue to pursue this business opportunity.
4. Research, using at least one other sources other than the textbook materials that support your calculations and conclusions.
Papers will be assessed on the following criteria:
1. Provide the final, accurate NPV calculations.
2. A narrative on how the NPVs were calculated. The narrative should include how the data relating to depreciation and its tax consequences affect the cash flow of the project. Include a table with your analysis to present your work.
3. Provide a conclusion on whether this business opportunity should be pursued.
Format your assignment according to the give formatting requirements:
1. The answer must be double spaced, typed, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the course title, the student's name, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.