Time line | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | |||
Cost of new machine | -490000 | ||||||||||
Initial working capital | -25000 | ||||||||||
=Initial Investment outlay | -515000 | ||||||||||
100.00% | |||||||||||
Profits | 120000 | 120000 | 120000 | 120000 | 120000 | 120000 | 120000 | ||||
-Depreciation | Cost of equipment/no. of years | -70000 | -70000 | -70000 | -70000 | -70000 | -70000 | -70000 | 0 | =Salvage Value | |
=Pretax cash flows | 50000 | 50000 | 50000 | 50000 | 50000 | 50000 | 50000 | ||||
-taxes | =(Pretax cash flows)*(1-tax) | 39500 | 39500 | 39500 | 39500 | 39500 | 39500 | 39500 | |||
+Depreciation | 70000 | 70000 | 70000 | 70000 | 70000 | 70000 | 70000 | ||||
=after tax operating cash flow | 109500 | 109500 | 109500 | 109500 | 109500 | 109500 | 109500 | ||||
reversal of working capital | 25000 | ||||||||||
+Proceeds from sale of equipment after tax | =selling price* ( 1 -tax rate) | 39500 | |||||||||
+Tax shield on salvage book value | =Salvage value * tax rate | 0 | |||||||||
=Terminal year after tax cash flows | 64500 | ||||||||||
Total Cash flow for the period | -515000 | 109500 | 109500 | 109500 | 109500 | 109500 | 109500 | 174000 | |||
Discount factor= | (1+discount rate)^corresponding period | 1 | 1.12 | 1.2544 | 1.404928 | 1.5735194 | 1.7623417 | 1.9738227 | 2.210681407 | ||
Discounted CF= | Cashflow/discount factor | -515000 | 97767.85714 | 87292.72959 | 77939.93714 | 69589.23 | 62133.241 | 55476.108 | 78708.76347 | ||
NPV= | Sum of discounted CF= | 13907.87 |
4. Patty's Pickles is looking at a new pickle packaging system with an installed cost of...
4. Patty's Pickles is looking at a new pickle packaging system with an installed cost of $490,000. This cost will be depreciated straight-line to zero over the project's 7-year life, at the end of which the packaging system can be scrapped for $50,000. The pickle packaging system will save the firm $120,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $25,000. All of the net working capital will be recovered...
Patty's Pickles is looking at a new pickle packaging system with an installed cost of $490,000. This cost will be depreciated straight-line to zero over the project's 7-year life, at the end of which the packaging system can be scrapped for $50,000. The pickle packaging system will save the firm $120,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $25,000. All of the net working capital will be recovered at...
Dog Up! Franks is looking at a new sausage system with an installed cost of $490,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $71,000. The sausage system will save the firm $148,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $29,500. If the tax rate is 22 percent and the discount rate...
8. Project Evaluation Dog Up! Franks is looking at a new sausage system with an installed cost of $375,000. This cost will be depreciated straight-line to zero over the project's 5-year life, at the end of which the sausage system can be scrapped for $25,000. The sausage system will save the firm $95.000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $15,000. If the tax rate is 24 percent and...
Kolby's Korndogs is looking at a new sausage system with an installed cost of $735,000. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $105,000. The sausage system will save the firm $204,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $35,000. If the tax rate is 34 percent and the discount rate is...
Kolby's Korndogs is looking at a new sausage system with an installed cost of $800,000. This cost will be depreciated straight-line to zero over the project's five- year life, at the end of which the sausage system can be scrapped for $95,000. The sausage system will save the firm $150,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $45,000. If the tax rate is 35 percent and the discount rate...
Dog Up! Franks is looking at a new sausage system with an installed cost of $445,000 This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $53,000. The sausage system will save the firm $139,000 per year in pretax operating costs, and the system requires an initial investment in net working capital of $25,000. If the tax rate is 23 percent and the discount rate...
Dog Up! Franks is looking at a new sausage system with an installed cost of $514,960. This cost will be depreciated straight-line to zero over the project's five-year life, at the end of which the sausage system can be scrapped for $72,229. The sausage system will save the firm $175,948 per year in pretax operating costs, and the system requires an initial investment in net working capital of $37,379. If the tax rate is 37 percent and the discount rate...
Dog Up! Franks is looking at a new sausage system with an installed cost of $834,600. This cost will be depreciated straight-line to zero over the project's 8-year life, at the end of which the sausage system can be scrapped for $128,400. The sausage system will save the firm $256,800 per year in pretax operating costs, and the system requires an initial investment in net working capital of $59,920. If the tax rate is 24 percent and the discount rate...
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