Eq cost

Install
MACRS
Economic life
Sales
sales growth
CGS
FC
Change in inventory
Selling price in 6
T
WACC

100,000.00
40,000.00
5
6
200,000.00
5%
75%
25,000.00
10,000.00
60,000.00
40%
9.50%

Sales
CGS
FC
EBDT
Dep
EBT
Tax
NI
Plus dep
OCF
Eq
NWC
Cash flow from project

NPV
IRR
PI

After tax salvage if sold in 5 years

Accumulated Dep
Book value
After tax salvage if sold in 5 years

Dep base

140000

After tax salvage

Book value
0 asset will be fully depreciated after 6 years
Gain/(loss)
60,000.00 gain
Tax consq
24,000.00 liability
After tax salvage 36,000.00

1
2
3
4
5
6
200,000.00 210,000.00 220,500.00 231,525.00 243,101.25 255,256.31
150,000.00 157,500.00 165,375.00 173,643.75 182,325.94 191,442.23
25,000.00
25,000.00
25,000.00
25,000.00
25,000.00
25,000.00
25,000.00
27,500.00
30,125.00
32,881.25
35,775.31
38,814.08
28,000.00
44,800.00
26,880.00
16,100.00
16,100.00
8,120.00
(3,000.00) (17,300.00)
3,245.00
16,781.25
19,675.31
30,694.08
(1,200.00)
(6,920.00)
1,298.00
6,712.50
7,870.13
12,277.63
(1,800.00) (10,380.00)
1,947.00
10,068.75
11,805.19
18,416.45
28,000.00
44,800.00
26,880.00
16,100.00
16,100.00
8,120.00
26,200.00
34,420.00
28,827.00
26,168.75
27,905.19
26,536.45
(140,000.00)
36,000.00
(10,000.00)
10,000.00
(150,000.00) 26,200.00
34,420.00
28,827.00
26,168.75
27,905.19
72,536.45

2,597.85
10.01%
1.02

131,880.00
8,120.00
39,248.00

Year
1
2
3
4
5
6
7
8
9
10
11

3-year
0.333
0.445
0.148
0.074

5-year
0.2
0.32
0.192
0.115
0.115
0.058

7-year
0.143
0.245
0.175
0.125
0.089
0.089
0.089
0.045

10-year
0.1
0.18
0.144
0.115
0.092
0.074
0.066
0.066
0.065
0.065
0.033

rate

11%

year

A
0
1
2
3
4
5

NPV
IRR
PI
MIRR

year

B
(50,000.00)
20,000.00
25,000.00
30,000.00
35,000.00
40,000.00

(50,000.00)
35,000.00
30,000.00
25,000.00
20,000.00
15,000.00

(20,000.00)
30,000.00
30,000.00
(40,000.00)

57,037.96
44.65%

46,236.38
50.00%

2.14
29.25%

1.92
26.53%

2,128.04
0.00%
68.61%
1.04
12.58%

A
0
1
2
3
4
5

B
(50,000.00)
20,000.00
25,000.00
30,000.00
35,000.00
40,000.00

crossover rate

(50,000.00)
35,000.00
30,000.00
25,000.00
20,000.00
15,000.00

Incremental cash flow

(15,000.00)
(5,000.00)
5,000.00
15,000.00
25,000.00
29.32%

Project A should be accepted since it has the highest NPV

Project C
year
inflows
outflows
0
0 20,000.00
1 30,000.00
0
2 30,000.00
0
3
0 40,000.00
PV
$51,375.70 $49,247.66

Eq cost
Transp/Install
S/L
Salvage
Market value in 4
NWC
Sales
CGS
Sales growth
T
Rate

100,000.00
15,000.00
3
20,000.00
15,000.00
30,000.00
150,000.00
30%
4%
35%
10%

0
Sales
CGS
Dep
EBT
Tax
NI
plus dep
OCF
Eq
NWC

(115,000.00)
(30,000.00)
(145,000.00)

Dep base

115,000.00

Annual dep

31,666.67 or

After tax salvage

Accumilated dep
Book value in 4 yrs
Gain/(loss) from sale
Tax consq
After tax salvage

95,000.00
20,000.00
(5,000.00) Loss
(1,750.00) Tax saving
16,750.00

1
150,000.00
45,000.00
31,666.67
73,333.33
25,666.67
47,666.67
31,666.67
79,333.33

2
156,000.00
46,800.00
31,666.67
77,533.33
27,136.67
50,396.67
31,666.67
82,063.33

3
162,240.00
48,672.00
31,666.67
81,901.33
28,665.47
53,235.87
31,666.67
84,902.53

79,333.33

82,063.33

84,902.53

4
168,729.60
50,618.88
118,110.72
41,338.75
76,771.97
76,771.97
16,750.00
30,000.00
123,521.97

$31,666.67

2) OCF
46,750.00

3) Terminal cash flow

1) Cash outflow in year 0 (I/O)

NPV
IRR

143,097.84
47.06%

Data Table

120,000.00
130,000.00
140,000.00
150,000.00
160,000.00
170,000.00
180,000.00

143,097.84
97,376.97
112,617.26
127,857.55
143,097.84
158,338.14
173,578.43
188,818.72

After tax salvage if asset is sold in 2 years

Accumilated dep
63,333.33
Book value in 4 yrs
51,666.67
Gain/(loss) from sale
(36,666.67) loss
Tax consq
(12,833.33) Saving
After tax salvage
27,833.33