Finance Assignment | Top Essay Writing

The managers of Poncho Parts, Inc. plan to manufacture engine blocks for classic cars from the 1960’s era. They expect to sell 350 engine blocks annually for the next 5 years, and management believes that the auto restorers will pay $2,000 per engine block. The necessary foundry and machining equipment will require an outlay of $750,000.

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This amount will be depreciated straight line to zero over the projects life. The firm expects to be able to dispose of the manufacturing equipment for $150,000 at the end of the project. Labor and material costs total $750 per block, and fixed costs are $150,000 per year. Assume a 32% tax rate and a 12% discount rate.

What is the NPV of the project?

What is the IRR of the project?

Suppose that the project requires an investment of working capital of $150,000, but all else remains the same. What is the free cash flow in time 1 through time 4? Get Finance homework help today