Prototype $ 750,000

Marketing Study $ 200,000

Production Var Cost $ 185 per unit

Operation Fixed Cost $ 5,300,000 per year

Estimated Sales
Year 1 74,000
Year 2 95,000
Year 3 125,000
Year 4 105,000
Year 5 80,000
Unit Price $ 480

Necessary equipment $ 38,500,000

Equpment value in 5 year $ 5,400,000

Year 1 80,000
Year 2 60,000
Unit price $ 310

Unit price $ 275

Varcost $ 125 per unit

Fixed cost $ 1,800,000 per year

NWC 20% of sales

tax rate 35%
required return 12%
Sales Year 1 Year 2
New Smartphone $ 35,520,000 $ 45,600,000
- Lost Sales (from old phone) $ -4,125,000 $ -4,125,000
- Lost Revenue (from old phone) $ -2,275,000 $ -1,575,000
Total Revenue $ 29,120,000 $ 39,900,000

Cost
- Variable Cost New Phone $ 13,690,000 $ 17,575,000
- Fixed Cost Old Phone $ 1,800,000 $ 1,800,000
Total Cost $ 15,490,000 $ 19,375,000

Sales $ 29,120,000 $ 39,900,000

Variable Cost $ 15,490,000 $ 19,375,000
Fixed Cost New Phone $ 5,300,000 $ 5,300,000
Depreciation $ 5,501,650 $ 9,428,650
EBT $ 2,828,350 $ 5,796,350
Tax $ 989,922 $ 2,028,722
Net Income $ 1,838,428 $ 3,767,628
+Depreciation $ 5,501,650 $ 9,428,650
OCF $ 7,340,078 $ 13,196,278

NWC
Beg $ - $ 5,824,000
End $ 5,824,000 $ 7,980,000
NWC CF $ -5,824,000 $ -2,156,000
Net CF $ 1,516,078 $ 11,040,278

BV of Equipment = 38500000 - 5501650 - 9428650 - 6733650 - 4808650 - 3438050

= 8,589,350
Taxes on sale of equipment = (BV - MV)*(tc)
= 1,116,273

Project Cash Flow Year 0 $ -38,500,000

Year 1 $ 1,516,078
Year 2 $ 11,040,278
Year 3 $ 18,860,528
Year 4 $ 20,291,778
Year 5 $ 23,178,318
 Year 3 Year 4 Year 5 Depreciation
$ 60,000,000 $ 50,400,000 $ 38,400,000 Year MACRS percentage
1 14.29%
2 24.49%
$ 60,000,000 $ 50,400,000 $ 38,400,000 3 17.49%
4 12.49%
5 8.93%
$ 23,125,000 $ 19,425,000 $ 14,800,000 6 8.92%
7 8.93%
$ 23,125,000 $ 19,425,000 $ 14,800,000 8 4.46%

$ 60,000,000 $ 50,400,000 $ 38,400,000

$ 23,125,000 $ 19,425,000 $ 14,800,000
$ 5,300,000 $ 5,300,000 $ 5,300,000
$ 6,733,650 $ 4,808,650 $ 3,438,050
$ 24,841,350 $ 20,866,350 $ 14,861,950
$ 8,694,473 $ 7,303,223 $ 5,201,683
$ 16,146,878 $ 13,563,128 $ 9,660,268
$ 6,733,650 $ 4,808,650 $ 3,438,050
$ 22,880,528 $ 18,371,778 $ 13,098,318

$ 7,980,000 $ 12,000,000 $ 10,080,000

$ 12,000,000 $ 10,080,000 $ -
$ -4,020,000 $ 1,920,000 $ 10,080,000
$ 18,860,528 $ 20,291,778 $ 23,178,318

50 - 6733650 - 4808650 - 3438050

- 36,983,923
- 25,943,645
- 7,083,118
13,208,660
Equipment Depreciation Ending BV
$ 38,500,000 5,501,650 32,998,350
$ 38,500,000 9,428,650 23,569,700
$ 38,500,000 6,733,650 16,836,050
$ 38,500,000 4,808,650 12,027,400
$ 38,500,000 3,438,050 8,589,350
$ 38,500,000 3,434,200 5,155,150
$ 38,500,000 3,438,050 1,717,100
$ 38,500,000 1,717,100 -
- Variable Cost Old P ### ###