Question

mideque, inc., is considering a project to produce pens. it is estimated that the initial cost of the equipment, including transportation, installation, and so forth, will be $22,995. mideque also estimates that the revenues (sales) each year over the five-year life of the project will be $12,690. the other yearly expenses (e.g., cost of goods sold, wages, and salaries, etc) will be $6955 mideque will finance $9253 by loan with an interest rate of 13% per year. the loan will be repaid at the rate of $2277 per year plus interest on the remaining balance each year. Mideque uses straight-line depreciation, and the equipment will have no salvage value at the end of its life. assume a corporate-profits tax rate of 47%. obtain the initial investment.

Answer 1

Initial Investment will be $13742

Initial Cost of Equipment - $22995

Less:- Loan taken    -$9253

Net Initial Investment - $13742