This case continues following the new project of the WePPROMOTECompany, that you and your partner ow

This case continues following the new project of the WePPROMOTECompany, that you and your partner own. WePROMOTE is in thepromotional materials business. The project being considered is tomanufacture a unique case for smartphones. The case is verydurable, attractive and fits virtually all models of smartphone. Itwill also have the logo of your client, a prominent, local companyand is planned to be given away at public relations events by yourclient. As we know from prior cases involving this company, more andmore details of the project become apparent and with more precisionand certainty. The following are the final values to the data that you havebeen estimating up to this point: – You can borrow funds from your bank at 3%. – The cost to install the needed equipment will be $105,000 andthis cost is incurred prior to any cash is received by theproject. – The gross revenues from the project will be $25,000 for year1, then $27,000 for years 2 and 3. Year 4 will be $28,000 and year5 (the last year of the project) will be $23,000. – The expected annual cash outflows (current project costs) areestimated at being $13,000 for the first year, then $12,000 foryears 2, 3, and 4. The final year costs will be $10,000. – Your tax rate is 30% and you plan to depreciate the equipmenton a straight-line basis for the life of the equipment. – After 5 years the equipment will stop working and will have aresidual (salvage) value of $5,000). – The discount rate you are assuming is now 7%. The Tasks: 1. Perform the final NPV calculations and provide a narrative ofhow you calculated the computations and why. 2. Then provide a summary conclusion on whether you shouldcontinue to pursue this business opportunity. . . .

 

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