Revenues generated are forcasted as follows: Year 1: $54,000 Year 2: $30,000 Yea

Question

Revenues generated are forcasted as follows:

Year 1: $54,000

Year 2: $30,000

Year 3: $20,000

Year 4: $10,000

thereafter 0

Expenses are expencted to be 50% of revenues and working capital required in each year is expected to be 10% of revenues the following year. The prodeuct requires an immediate investment of $50,000 in plant and equipment. The initial investment in the product is $55,400.

If the plant and equipment are depreciated over 4 years to a salvage value of zero using straight line depreciation, and the firm's tax rate is 30%, what are the projected cash flows in each year?

(Assume plant and equipment are worthless after 4 years)

Cash Flow Year 1: ????? ($18,705 is not right)

Cash Flow Year 2: ????? ($11,905 is not right)

Cash Flow Year 3: ????? ($9,655 is not right)

Cash Flow Year 4: ????? ($7,405 is not right)

If the opportunity cost of capital is 12%, what is the projects NPV? (Do NOT round intermediate calculations. Round your answer to 2 decimal places)

NPV: ???? (-$15,741.31 is not right)

What is the project IRR? (Do NOT round intermediate calculations. Round your answer to 2 decimal places)

IRR: ????? (-6.71% is not right)

The above answers is what I came up with and I am not sure what I am doing wrong. Your help is much appreciated. Thanks

Explanation / Answer

Revenues generated are forcasted as follows: Year 1: $54,000 Year 2: $30,000 Yea

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