Question

TABLE 4 You are considering a new product launch: Equipment for the project will cost $875,000 The project will have a four-year life, and have no salvage value. Depreciation is straight-line to zero over the four years. The required return on the project is 11%, and the tax rate is 35%. Projected annual sales and cost figures are shown below (sales and costs are estimated to be identical for each year 1-4)Equipment cost $875,000 Project length (years) 4 Required return 11% Tax rate 35% Annual Sales $3,948,000 Annual Variable costs $2,869,000 Annual Fixed costs $345,000. Calculate Annual Depreciation, Annual EBIT, Annual Taxes, Annual OCF, Cash flows YEAR 0 1 2 3 4, and PROJECT NPV.

Answer 1

Initel Cost of Equipmet - এ५e Requind Rete f Pegechad Income Stolenet PARTICULARS Amual Sales Annual Varioble Cost Annuol Contribuhon Fired Cast $375 000 Cor 4ansecutue yeaa AMOUNT 39.48,000 (22,69,o00) (0,79,000 (345.000)

Deprciahon 27S000 4 (2,19750 Annuol EBIT Tinterert inpoe EBT Tan Expensol 35 Foming attr Taa Depre chhon CL80333) 3,34, १।२ &12750 3,662 Adldl: A mual Cxh Cleus (1-4yes) Pver: Aesaut valus Cota InflowAmuol Cosh Ftow x PVAF PVAF Preseut valusa Annuity factor SS3,662 3.1o 244 - $12,12, १03 (apper uipmet NOt Presentalus PPvCT-mitis1 outtlou on .12,12203-825,oon $ 242703 Theretoe Prepct should bLcebteal