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The company is considering to purchase an equipment of CZK 3 000 000. Equipment will be used the depreciation level no 1 (see table 1). You are not able to pay it at once so split it to two payments. First 1 million will be paid right know and other CZK 2 000 000 in the end of 3rd year.
Estimated revenue and investment costs are summarized in Table 2. Current assets and current liabilities changes which might happen during the lifetime of the project can be seen in Table 3.
In the end of third year equipment can be sold for CZK 400 000.
The long-term capital represents 40 % and foreign capital 40 % with 6 % p.a. of the total capital. Corporate tax rate is 20 %.
It is an engineering company with mass production, linked to the major contracts of automotive industry, whose risk can be characterized by the amount unleveraged beta coefficient of 0.98 and has its headquarters in the Czech Republic. Company decided that its return rate of its investments (i.e. discount factor) should be at least company's cost of capital. Evaluate if this investment can be accepted or not using NPV, IRR, discounted cash flow and DEVA (4 methods).