Homework Answers
| Tax | 35% | Year | 0 | 1 | 2 | 3 | 4 | 5 |
| Required rate of return | 18% | Initital Investment | $19,500,000 | |||||
| Salvage | 35% | Working Capital | $1,500,000 | |||||
| Working Capital | 15% | MACR | 14.29% | 24.49% | 17.49% | 12.49% | 8.93% | |
| Sales unit | 81000 | 89000 | 97000 | 92000 | 77000 | |||
| Sales price per unit | $345 | $345 | $345 | $345 | $345 | |||
| Sales $ | $27,945,000 | $30,705,000 | $33,465,000 | $31,740,000 | $26,565,000 | |||
| Variable Price per unit | $190 | $190 | $190 | $190 | $190 | |||
| Variable price $ | $15,390,000 | $16,910,000 | $18,430,000 | $17,480,000 | $14,630,000 | |||
| Fixed Cost | $1,850,000 | $1,850,000 | $1,850,000 | $1,850,000 | $1,850,000 | |||
| Depreciation | $2,786,550 | $4,775,550 | $3,410,550 | $2,435,550 | $1,741,350 | |||
| EBIT | $7,918,450 | $7,169,450 | $9,774,450 | $9,974,450 | $8,343,650 | |||
| Taxes | $2,771,458 | $2,509,308 | $3,421,058 | $3,491,058 | $2,920,278 | |||
| Net Income | $5,146,993 | $4,660,143 | $6,353,393 | $6,483,393 | $5,423,373 | |||
| NWC | $4,191,750 | $4,605,750 | $5,019,750 | $4,761,000 | $3,984,750 | |||
| Change in NWC | -$414,000 | -$414,000 | $258,750 | $776,250 | $1,293,000 | |||
| BV | $16,713,450 | $11,937,900 | $8,527,350 | $6,091,800 | $4,350,450 | |||
| Salvage | $6,825,000 | |||||||
| Net Salvage | $5,958,908 | |||||||
| Net CF | $5,560,993 | $5,074,143 | $6,094,643 | $5,707,143 | $10,089,280 |
After Tax Salvage Value = Salvage Value - (Salvage Value-Book Value)*Tax
B) NPV = -$1,579,938.89, IRR=
14.92%
c)
| Rate | NPV |
| 6.00% | $5,939,255.81 |
| 8.00% | $4,398,964.74 |
| 10.00% | $2,990,653.25 |
| 12.00% | $1,700,214.02 |
| 14.00% | $515,303.97 |
| 16.00% | -$574,905.48 |
| 18.00% | -$1,579,938.89 |
| 20.00% | -$2,508,194.89 |
| 22.00% | -$3,367,097.28 |
| 24.00% | -$4,163,223.53 |
| 26.00% | -$4,902,414.56 |
| 28.00% | -$5,589,868.59 |
| 30.00% | -$6,230,221.73 |
| 32.00% | -$6,827,617.30 |
| 34.00% | -$7,385,765.63 |
| 36.00% | -$7,907,995.76 |
| 38.00% | -$8,397,300.24 |
| 40.00% | -$8,856,374.09 |
d)
| SP | VC | NPV |
| 300 | 160 | -$4,262,440 |
| 320 | 170 | -$2,479,346 |
| 340 | 180 | -$696,253 |
| 360 | 190 | $1,086,841 |
| 380 | 200 | $2,869,934 |
| 400 | 210 | $4,653,028 |
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