Question - The following information is available about an investment opportunity. Investments will occur at time 0 and will commence at time 1.
Initial cost-28 million
Unit Sales-400,000
Selling price per unit, this year-$60.00
Variable cost per year, this year-$42.00
Life expectancy-8 years
Salvage value-0
Depreciation-straight line
Tax rate-37%
Nominal discount rate-10%
Real discount rate-10%
Inflation rate-0%
1) Prepare a spreadsheet to estimate the projects annual after tax cash flows.
2) Calculate the investments IRR and NPV.