Business Finance Homework Help

• November plc is considering taking a project producing leaf recycling machines. The firm has produced the following figures relating to the project:

Year	1	2	3
Estimated sales (units)	950	1,300	1,500
Estimated selling price	£900	£950	£1,000
Variable costs per unit	£650	£675	£675

The project will also require the company to buy a machine to produce the leaf recyclers which will cost £750,000 and will be depreciated on a straight-line basis to 0 over the time of the project. The company’s required return is 12 percent.

REQUIRED:

i.Compute a set of operating free cash flows for this project, if the tax rate is 23%.

ii.Calculate the Net Present Value of the project and discuss what does this number mean to the firm’s shareholders.