Question

Pro - Project Pre Tax Aer Tax Preta Atera Preta After Tax 011000000 51100005 0000S 0000S 0000 15 175.005 2.500.00 53.750.00 53 .000.00 5 0.00 53.000.000 S ORI > $135.00 350000 5000S S 0000 06152) 15 125.00 52.500.00 $ 3,750.00 $ 300.00 5 0.00 5 0.00 552 5 12:56 $ 125.00$ 3,50000 5 0 0S 0S 500S 00 00 05215 5 1,7155 5518005 2.500.00 $ 3.750.00 5 000 5 000 78 5 18) S 125.00 2.500.00 for each project, late the event of the year 15 Subtract the initial investment to find the NPV 9.461.21 5000 Which is the best project according to NPV? O Type here to search Nil PN

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

LIU B C D E F G / H Tax rate 20.00% WACC 15% Year Project A Pre-tax CF After tax CFL -$10,000.00 -$10,000.00 $3,125.00 $2,500.00 $3,125.00 $2,500.00 $3,125.00 $2,500.00 $3,125.00 $2,500.00 $3,125.00 $2,500.00 $3,125.00 $2,500.00 Project B Pre-tax CF After tax CFL $10,000.00 $10,000.00 $3,750.00 $3,000.00 $3,750.00 $3,000.00 $3,750.00 $3,000.00 $3,750.00 $3,000.00 $3,750.00 $3,000.00 Project C Pre-tax CF | After tax CF -$80,000.00 -$8,000.00 $3,750.00 $3,000.00 $3,750.00 $3,000.00 $3,750.00 $3,000.00 $3,750.00 $3,000.00 -$1,250.00 -$1,000.00 5 6 PV Initial Investment NPV $9,461.21 $10,000.00 ($538.79) $10,056.47 $10,000.00 $56.47 $8,067.76 $8,000.00 $67.76

Cell reference -

A B D E F G H -NM Tax rate 0.2 WACC 0.15 Year Pre-tax CF - 10000 3125 3125 3125 3125 3125 3125 Project A After tax CF -10000 =C7*(1-$D$2) =C8*(1-$D$2) =C9*(1-$D$2) =C10*(1-$D$2) =C11*(1-$D$2) =C12*(1-$D$2) Project B Pre-tax CF After tax CF -10000 -10000 3750 =E7*(1-$D$2) 3750 =E8*(1-$D$2) 3750 =E9*(1-$D$2) 3750 =E10*(1-$D$2) 3750 =E11*(1-$D$2) 0 OEM Project C Pre-tax CF After tax CF -80000 =-8000 3750 =G7*(1-$D$2) 3750 =G8*(1-$D$2) 3750 =G9*(1-$D$2) 3750 =G10*(1-$D$2) =3750-5000 =G11*(1-$D$2) 14 15 PV =NPV($G$2,D7:012) Initial Investment =D6 NPV =D16+D17 в | =NPV(G2,F7:F11) =F6 =F16+F17 =NPV(G2,H7:H11) =H6 =H16+H17

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.