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Fast Manufacturers PLC have reconsidered their new project and the initial investment required of £1,000,000 is now 25% less than the original conception. The project will remain will have a three year life span and have no scrap value.
However, this new conception has operating costs of £150,000 in year 1, and increasing by 5% due to inflation the following years. The gross revenue will also be higher across the board. The new project conception is forecasting a gross revenue of £525,000 in year 1 and again increasing with inflation 5% for years 2 and 3.
If the cost of capital has remained at 14%, should Fast Manufacturers PLC go ahead with the revised project?
A. Do not go ahead with the project
B. Go ahead with the project
C. Cannot tell from the information given
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