Answer to Question #224263 in Finance for Andrick Angel

Question #224263
A business is evaluating a project for which the following information is relevant:

Sales will be K100,000 in the first year and are expected to increase by 5% per year.

Costs will be K50,000 and are expected to increase by 7% per year.

Capital investment will be K200,000 and attracts tax allowable depreciation of the full value of the investment over the 5 year length of the project.

The tax rate is 30%.

The business uses a real discount rate of 9%.

Calculate the NPV for the project. (15 marks)
Expert's answer

NPV=-200 000+6422.02+6775.52+7029.57+7195.65+7284.16=-165 293.08

The project is unprofitable

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!


Louis AG
27.08.21, 15:46

Answer on Question #224263 I think there is an error to solve tax which is 30% of EBT (profit) for each year.And why is it that you are not adding depreciation after solving for Net Income?

Leave a comment

Ask Your question

New on Blog