The manager of ppo inc plans to manufacture engine blocks


The manager of PPO Inc. plans to manufacture engine blocks for classic cars from the 1960s. The revenue from the blocks will be $750,000 per year for each of the next 4 years. The equipment will cost $800,000 depreciated using a 3 year MACRS life. There will be a change in net operating working capital of $10,000. Assume a zero salvage value. Operating costs for each of the 4 years will be $250,000. Assume a 40% tax rate and a 12% discount rate (cost of capital). a. What are the cash flows for years 0 through 4? b. Calculate the net present value, the IRR, MIRR and Profitability Index, Payback for the project. c. Will you accept the project?

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Financial Management: The manager of ppo inc plans to manufacture engine blocks
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