Question

Q: Construct a cashflow table and calculate NPV.
Assumptions are as follow
1.   Inflation: 10% per year.
2.   Capital Expenditure: $8 million for machinery; $5 million for market value of factory; $2.4 million for warehouse extension (we assume that it is eventually needed or that electric motor project and surplus capacity cannot be used in the interim). We assume salvage value of $3 million in real terms less tax at 35%.
3.   Working Capital: We assume inventory in year t is 9.1% of expected revenues in year (t + 1). We also assume that receivables less payables, in year t, is equal to 5% of revenues in year t.
4.   Depreciation Tax Shield: Based on 35% tax rate and 5-year ACRS class. This is a simplifying and probably inaccurate assumption; i.e., not all the investment would fall in the 5-year class. Also, the factory is currently owned by the company and may already be partially depreciated. We assume the company can use tax shields as they arise.
5.   Revenues: Sales of 2,000 motors in 2017, 4,000 motors in 2018, and 10,000 motors thereafter. The unit price is assumed to decline from $4,000 (real) to $2,850 when competition enters in 2019. The latter is the figure at which new entrants’ investment in the project would have NPV = 0.
6.   Operating Costs: We assume direct labor costs decline progressively from $2,500 per unit in 2017, to $2,250 in 2018 and to $2,000 in real terms in 2019 and after.
7.   Other Costs: We assume true incremental costs are 10% of revenue.
8.   Tax: 35% of revenue less costs.
9.   Opportunity Cost of Capital: Assumed 20%.

How to calculate the capital expenditure in 2026? Could you please show me the steps?

As shown in the answer, capital expenditure in 2016 is -15400 while capital expenditure in 2026 is 5058 but I dont know how to get this answer.