draw up the cash flow schedule for the project on the basis of straight line depreci 539631

Aug 29, 2021 | Uncategorized

The following investment project is submitted to you:

· project: extension of an industrial plant;

· purchase of equipment € 20m;

· setup costs €1.5m;

· useful life 8 years;

  • e residual value 0;
  • e increase in working capital € 2.5m

The project will result in an increase in EBITDA of € 3m per year, over the 8 years during which the new asset is used. The equipment is depreciated over 5 years. The corporate income tax rate is 40%:

(a) Draw up the cash flow schedule for the project, on the basis of straight-line

depreciation.

(b) Calculate each of the two cases:

· net present value at 10%;

· the internal rate of return of the project.