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(Solved): A company is considering a project which requires $3.5 million in capital investment. The project ca ...



A company is considering a project which requires $3.5 million in capital investment. The project can bring in an annual revenue of $200k/year next 18 years. The annual operation cost (e.g. labor and supplies) is $58k/year. Starting from year 13, the equipment will need major maintenance and this cost starts at $34k/year and increase by $34k each year until the end of the project life time (18 years). The equipment has a salvage value of $1,050k at the end of the project. Calculate the project’s net future value at year 18 to find out whether it’s worth investing. The interest rate is 4%.



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