Determine if this project is profitable under the following circumstances: A company is undertaking a new project. The specialized equipment that needs to be bought has an expense of $28,000. In addition, permits and licenses are required which will cost $1500. Employee training will be an additional $46,000 expenditure. To produce the merchandise, raw materials are required that will cost $48,000 and this project will generate cash flows of $25,000 per year for 10 years. The cost of capital for this project is 12%.

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Solution using a financial calculator: Determine the initial expense: $28,000 + $1,500 + $46,000 + $48,000 = $123,500 initial investment Determine the NPV using the TIBAII: CF₀ = -123,500 CF₁ = 25,000 F₁ = 10 I = 12 NPV = $17,755.58

Determine If This Project Is Profitable Under the Following Circumstances