Inputs: Cost of Asset 20,900,000.00 initial change in NWC 1590000 Price Per Unit
ID: 2648594 • Letter: I
Question
Inputs: Cost of Asset 20,900,000.00 initial change in NWC 1590000 Price Per Unit 375 subewquent change in New NWC 20.00% Cost per Unit 260 Market Value of FA at end 25.00% Annual fixed Units 1490000 Tax Rate 30.00% year 1 2 3 4 5 Required Return 19.00% unit sales 80000 93000 107000 102000 83000 MACRS allowances 0.1429 0.2449 0.1749 0.1249 0.0893 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Initial investment (20,900,000.00) sales 30,000,000.00 34,875,000.00 40,125,000.00 38,250,000.00 31,125,000.00 -fixed costs (1,490,000.00) (1,490,000.00) (1,490,000.00) (1,490,000.00) (1,490,000.00) -v. costs (20,800,000.00) (24,180,000.00) (27,820,000.00) (26,520,000.00) (21,580,000.00) -taxes (2,313,000.00) (2,761,500.00) (3,244,500.00) (3,072,000.00) (2,416,500.00) Earnings after taxes 5,397,000.00 6,443,500.00 7,570,500.00 7,168,000.00 5,638,500.00 =+ TR * depreciation 895,983.00 1,535,523.00 1,096,623.00 783,123.00 559,911.00 BV= Operating cash flow 6,292,983.00 7,979,023.00 8,667,123.00 7,951,123.00 6,198,411.00 year MACRS % deprecaiton End BV Change in NWC (1,590,000.00) 975,000.00 1,050,000.00 (375,000.00) (1,425,000.00) (1,365,000.00) 1 0.1429 2,986,610.00 17,913,390.00 Sale of equipment 5,225,000.00 2 0.2449 5,118,410.00 12,794,980.00 Tax on sale of equipment (168,663.00) 3 0.1749 3,655,410.00 9,139,570.00 Net cash flow (22,490,000.00) 7,267,983.00 9,029,023.00 8,292,123.00 6,526,123.00 9,889,748.00 4 0.1249 2,610,410.00 6,529,160.00 5 0.0893 1,866,370.00 4,662,790.00 NPV= IRR= Inputs: Cost of Asset 20,900,000.00 initial change in NWC 1590000 Price Per Unit 375 subewquent change in New NWC 20.00% Cost per Unit 260 Market Value of FA at end 25.00% Annual fixed Units 1490000 Tax Rate 30.00% year 1 2 3 4 5 Required Return 19.00% unit sales 80000 93000 107000 102000 83000 MACRS allowances 0.1429 0.2449 0.1749 0.1249 0.0893 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Initial investment (20,900,000.00) sales 30,000,000.00 34,875,000.00 40,125,000.00 38,250,000.00 31,125,000.00 -fixed costs (1,490,000.00) (1,490,000.00) (1,490,000.00) (1,490,000.00) (1,490,000.00) -v. costs (20,800,000.00) (24,180,000.00) (27,820,000.00) (26,520,000.00) (21,580,000.00) -taxes (2,313,000.00) (2,761,500.00) (3,244,500.00) (3,072,000.00) (2,416,500.00) Earnings after taxes 5,397,000.00 6,443,500.00 7,570,500.00 7,168,000.00 5,638,500.00 =+ TR * depreciation 895,983.00 1,535,523.00 1,096,623.00 783,123.00 559,911.00 BV= Operating cash flow 6,292,983.00 7,979,023.00 8,667,123.00 7,951,123.00 6,198,411.00 year MACRS % deprecaiton End BV Change in NWC (1,590,000.00) 975,000.00 1,050,000.00 (375,000.00) (1,425,000.00) (1,365,000.00) 1 0.1429 2,986,610.00 17,913,390.00 Sale of equipment 5,225,000.00 2 0.2449 5,118,410.00 12,794,980.00 Tax on sale of equipment (168,663.00) 3 0.1749 3,655,410.00 9,139,570.00 Net cash flow (22,490,000.00) 7,267,983.00 9,029,023.00 8,292,123.00 6,526,123.00 9,889,748.00 4 0.1249 2,610,410.00 6,529,160.00 5 0.0893 1,866,370.00 4,662,790.00 NPV= IRR=Explanation / Answer
Calulation of NPV :
Year 1 2 3 4 5
7,267,983.00 9,029,023.00 8,292,123.00 6,526,123.00 9,889,748.00
0.1429 0.2449 0.1749 0.1249 0.0893
Present value of Cash flows 1038594.77 2211207.73 1450292.31 815112.76 883154.49
Total PV of Cash Inflows = 1038594.77 + 2211207.73 + 1450292.31 + 815112.76 + 883154.49 = $6398362.06
Total PV of Cash Inflows = $6398362.06 - Intial Investment ( 22,490,000.00) = -$16091637.94
NPV = -$16091637.94
IRR : 23%