Total sell of devices = 450000 devices per aannum
Price per unit of device = $93/piece
Total revenue from device = 450000*93 = $41850000
Variable cost/device = $74
Total variable cost = $74*450000 = $33300000
Given Fixed cost = $215000 per annum
Hence Earnings before Interest, depreciation and tax (EBITDA)
= $41850000 - $ $33300000 - $215000
= $ 8,335,000
Depreciation rate = 25%
Hence depreciation will be charged for first 4 years till the value of assets become 0.
Depreciation per annum = $785000*0.25
= $ 196250
Since there is no debt and rate of tax is 35%
Profit after tax = ($8335000 - $196250)(1-0.35)
= $5290187.50
Cash outflow at Year 0 = Machine cost + Working Capital = $785000 + $140000 = -$925000
Cash Inflow Year 1 to 4 = Profit after Tax + Depreciation
= $5290187.50 + $196250 = $5,286,437.5
Cash Inflow Year 5 (Without depreciation) = EBITDA * (1-Tax rate) + Working capital Realisation
= $8335000*0.65 + $140000
= $ 5,557,750
Discount rate = 19%
Year Cashflow. Discounted CF @ 19
0. - 925000. 925000
1. $5,286,437.50. 4,442,384.45378
2. $5,286,437.50. 3,733,096.17965 3. $5,286,437.50. 3,137,055.61315 4. $5,286,437.50. 2,636,181.18752. 5 $ 5,557,750. 2,328,971.64129
NPV = 15,352,689.07
We believe we can sell 450,000 home security devices per year at $93 per piece. They...
We believe we can sell 450,000 home security devices per year at $93 per piece. They cost $74 to manufacture (variable cost). Fixed production costs run $215,000 per year. The necessary equipment costs $785,000 to buy and would be depreciated at a 25% CCA rate. The equipment would have a zero salvage value after the five-year life of the project. We need to invest $140,000 in net working capital up front; no additional net working capital investment is necessary. The...
Question 1 10 points Save Answer We believe we can sell 450,000 home security devices per year at $93 per piece. They cost $74 to manufacture (variable cost). Fixed production costs run $215,000 per year. The necessary equipment costs $785,000 to buy and would be depreciated at a 25% CCA rate. The equipment would have a zero salvage value after the five-year life of the project. We need to invest $140,000 in net working capital up front; no additional net...
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Question 11 10 points Saved We believe we can sell 75,000 home security devices per year at $200 per piece. They cost $120 to manufacture (variable cost). Fixed production costs run $215,000 per year. The necessary equipment costs $785,000 to buy and would be depreciated at a 25% CCA rate. The equipment would have a zero salvage value after the five-year life of the project. We need to invest $140,000 in net working capital up front; no additional net working...
pls help Asap! show calculations in writting 10 points Save Answe We believe we can sell 75,000 home security devices per year at $200 per piece. They cost $120 to manufacture (variable cost yFixed production costs run $215,000 per year. The necessary equipment costs $785,000 to buy and would be depreciated at a 25% CCA rate. The equipment would have a zero salvage value after the five-year life of the project. We need to invest $140,000 in net working capital...
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