Initial cash outflow = Acquisition cost+transportation charges+other costs+ change in working capital-cashflow from disposal of assets
=3720000+940000+450000+4000+34000+(75000-22000)-180000 = $5141000
Operating cash flow = Net operating income-Taxes+Depreciation
Since there is no change in revenue per year or other amounts, operating cash flow would be same every year.
Year 1 (in $) | |
Project revenues(growth rate) | 1470000 |
Gross profit | 1470000 |
(Cash operating expense) | -53000 |
(Depreciation) | 1232500 |
Net operating income | 184500 |
(Taxes @32%) | 59040 |
NOPAT | 125460 |
Depreciation | 1232500 |
Operating cash flow | 1357960 |
Depreciation = (3720000+940000+450000 -180000)/4= $1232500
Terminal cash flow:
Proceeds from disposal | 180000 |
Tax Rate | 32% |
Tax | 57600 |
After tax proceeds | 122400 |
Change in working capital | 53000 |
Terminal cashflow | 175400 |
To calculate NPV, use formula :
NPV= Present value of net cash inflows-initial investment
Present value = Future value/(1+r)^t
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