Question

Calculate the NPV of a project under consideration with the following information: project life = 5...


Calculate the NPV of a project under consideration with the following information: project life = 5 years; project cost = $1,500,000; unit sales = 25,000; unit price = $200; unit variable cost = $170; fixed costs = $250,000; tax rate = 34%; rate of return = 12%.

Please show the steps on how to do this with Texas Instruments BAII Plus calculator

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Answer #1
Annual Operating cashflows:
CM per unit (200-170) 30
Multiply: Units sales 25000
Contribution Margin 750000
Less: Fixedd costt 250000
Less: Depreiation (1500000/5) 300000
Earnings before tax 200000
Less: tax @ 34% 68000
After tax income 132000
Add: Depreciation 300000
Annual cashflows 432000
Multiply: Annuity PVF at 12% 3.60478
Present value of cashflows 1557265
Less; Initial investment 1500000
NPV 57265
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