Question

SLPC has decided to start a new project manufacturing gardening tools, an entirely new area for the company. The company is considering a 4 year project in which revenues will be £6M/year (constant for 4 years) and the capital investment requirement will be £3M (zero value after 4 years). This investment is depreciated on a straight line basis over 4 years and the company's tax rate is 30%.

1. Calculate the incremental free cash flows for the project

2. If discount rate is 12.8% shoudl the company go ahead with the project?

Answer #1

Solution:-

**To Calculate Incremental free cash flows for the project
and IRR of the Project-**

**The IRR of the Project is greater than discount rate of
the company. So, company go head with this project.**

If you have any query related to question then feel free to ask me in a comment.Thanks.

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