You are reviewing a capital budget proposal. According to the proposal, an investment of $454,000...
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You are reviewing a capital budget proposal. According to the proposal, an investment of $454,000 of equipment, $54,000 in inventory, $66,000 in accounts receivable, partially offset by an increase $22,000 in accounts payable. The equipment will be placed in the 30% CCA asset class. The projected revenue is $540,000 and $390,000 in costs each year, during the project's six-year life cycle. The required return on investment of 14% and the marginal income tax rate is 30%. At the end of six years, the net working capital investment is recovered in full and the equipment will have zero salvage value. Calculate the project's NPV using the six-step approach. Would you recommend approval for the project? 1) Initial investment (nearest dollar without comma, e.g. 15000): 2) PV of operating income (nearest dollar without comma, e.g. 15000): 3) PV of CCA (nearest dollar without comma, e.g. 15000): 4) PV of working capital (nearest dollar without comma, e.g. 15000): 5) Net Present Value (nearest dollar without comma, e.g. 15000): 6) Approve or reject project (choose one) Reject Approve
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