Question

please show full working using the formula

Shaolin has decided to sell a new line of A1 smartphones, at $825 per unit and a variable cost of $370 per unit. The company has spent $150,000 for a marketing study that determined that the company will sell 74,000 A1 smartphones per year for seven years. The marketing study also determined that the company will lose sales of 8900 units per year of the previous model L2 smartphones. The L2 sell at $1250, with a variable cost of $630. The fixed costs each year will be $14,350,000.

The company has also spent $1,000,000 on research and development for the new smartphones. New plant and equipment will cost $29,400,000, and will be depreciated on a straight-line basis. The A1 smartphones will also require an increase in net working capital of $3,500,000 that will be returned at the end of the project. The tax rate is 40%, and the cost of capital is 14%.

Calculate the payback period and the NPV.

Answer 1

NPV	$11,215,392.79
Payback	3.30

The Annual operating cash flows are as below
OCF	Net revenueof A1	Loss of sales of L2	Depreciation	EBIT	Tax	PAT	OCF
1	19320000	5518000	4200000	9602000	3840800	5761200	9961200

Year	Initial cash flow	OCF	Working capital	Salvage	Net cash flows	Cumulative CF
0	-29400000		-3500000		-32900000	-32900000
1		$9,961,200.00			9961200	-22938800
2		$9,961,200.00			9961200	-12977600
3		$9,961,200.00			9961200	-3016400
4		$9,961,200.00			9961200	6944800
5		$9,961,200.00			9961200	16906000
6		$9,961,200.00			9961200	26867200
7		$9,961,200.00	3500000		13461200	40328400

Book1 - Excel Sign in - AutoSave oft File Home H Draw - Share 9 X Comments Insert Page Layout Formulas Data Review View Help Tell me what you want to do E == = A AA - A- General $ -% Insert. Ex Delete - Format Calibri 11 BIU - - Font J- Paste " - Conditional Format as Formatting Table Styles Cell Styles Sort & Find & Filter - Select Clipboard 5 Alignment Number Cells Editing C14 D E F G H I J K JOCF A B C 1 INPUTS 2 Initial cost 29400000 Year 3 Tax rate 0.4 4 Selling price 5 Working capital 3500000 2 6 MARR Initial cash flow =-62 Working capital I - 5 Salvare 1-217 -E4 =t5 -CG Net cash flows =SUM(03:43) -SUM(14:G4) -SUMD5:45) =SUMD6:66) -SUM(D7:57) -SUM(D8:58) =SUM(09:69) -SUM(D10:10) Cumulative CF =H3 -13+114 -14+H5 =15+H6 -IG+117 1-17 +18 18+H9 -19+I110 8 Salvage -E7 9 Useful life =18 NPV Payback =NPV(B6, H4:H10)+H3 -CG 16/17 OCE Net revenueof A1 Loss of sales of 12 Depreciation EBIT Tax |-74000*(825-370)-14350000 -8900*(1250-630) -($B$2-SD$8)/SB$9 -D17-E17-F17 -G17$B$ 3 PAT -G17-H17 -117+F17