Hello, I need help with the following problem: The gross earnings of a project a

Question

Hello, I need help with the following problem:

The gross earnings of a project are given in the table below in nominal terms:

Year:            0             1            2            3              4             5                 6

Gross

Earning:   ($10,000)   $2,000    $3,000   $4,000   $4,500     $5,000       $4,500

1. Determine the depreciation schedule for the assets if they can be depreciated on a straight-line basis over 6 years.

2. Determine the tax charged if the tax rate is 30%.

3. Determine the free cash flow.

4. Determine the NPV and IRR of the project if the inflation rate is 5% and the real discount rate is 11%, determine the NPV and IRR in real and nominal terms.

PLease provide a detailed step-by-step answer in Excel and show used formulas.

thank you!

Hello, I need help with the following problem: The gross earnings of a project are given in the table below in nominal terms: Year: 0 1 2 3 4 5 6 Gross Earning: ($10,000) $2,000 $3,000 $4,000 $4,500 $5,000 $4,500 1. Determine the depreciation schedule for the assets if they can be depreciated on a straight-line basis over 6 years. 2. Determine the tax charged if the tax rate is 30%. 3. Determine the free cash flow. 4. Determine the NPV and IRR of the project if the inflation rate is 5% and the real discount rate is 11%, determine the NPV and IRR in real and nominal terms. PLease provide a detailed step-by-step answer in Excel and show used formulas. thank you!

Explanation / Answer

Particulars/Year 0 1 2 3 4 5 6 Cash Flow -10000 2000 3000 4000 4500 5000 4500 Less Depriciaton=10000/6 1667 1667 1667 1667 1667 1667 Net Income 333 1333 2333 2833 3333 2833 Tax@30% 100 400 700 850 1000 850 Income after Tax 233 933 1633 1983 2333 1983 Add:Depriciation 1900 2600 3300 3650 4000 3650 Cash Flow -10000 2233 3933 5633 6483 7333 6483 PV @11% -10000 2012.0 3192.4 4119.0 4270.8 4352.0 3466.3 NPV 11412.44 PV @(11-5)% -10000 2106.9 3500.7 4729.9 5135.4 5479.9 4570.5 NPV 15523.22 Let (1+IRR)=A1 =10000-2233/A1-3933/A1^2-5633/A1^3-6483/A1^4-7333/A1^5-6483/A1^6=0 Solving IRR=1.4-1=0.4=40%

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