project y is estimated to cost 9000000 to start, Corporate Finance

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project y is estimated to cost 9000000 to start

Project Y is estimated to cost $9,000,000 to start and will generate $2,800,000 pre-tax income annually for 5 years with the startup cost being depreciated to zero straight line over 4 years. You plan to sell Project Y at the end of 5 years for $100,000. Tax regulations place your company's tax rate at 29%. Your company's cost of capital is estimated to be 11%

a. Calculate the net present value of the Project Y

i. NPV = $413,924.13 (IRR = 12.86%)

b. Calculate the profitability index of Project Y

i. PI = 1.05

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Corporate Finance: project y is estimated to cost 9000000 to start

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