iven the following information, solve for NPV: Initial investment needed $240,00
ID: 2733103 • Letter: I
Question
iven the following information, solve for NPV:
Initial investment needed $240,000
Salvage cash flows $15,000
WACC 10%
Year 1
Year 2
Year 3
Year 4
Sales
$280,000
$288,400
$297,052
$305,970
Costs
$140,000
$144,200
$148,526
$152,978
Depreciation
$79,200
$108,000
$36,000
$16,800
EBIT
$60,800
$36,200
$112,526
$136,192
Taxes 40%
$24,320
$14,480
$45,010
$54,477
Net operating profit after taxes
$36,480
$21,720
$67,516
$81,715
Depreciation
$79,200
$108,000
$36,000
$16,800
Net Operating CF
$115,680
$129,720
$103,516
$98,515
Year 0
Year 1
Year 2
Year 3
Year 4
CF due to investment in NOWC
($33,600)
($1,008)
($1,038)
($1,070)
$36,716
Year 1
Year 2
Year 3
Year 4
Sales
$280,000
$288,400
$297,052
$305,970
Costs
$140,000
$144,200
$148,526
$152,978
Depreciation
$79,200
$108,000
$36,000
$16,800
EBIT
$60,800
$36,200
$112,526
$136,192
Taxes 40%
$24,320
$14,480
$45,010
$54,477
Net operating profit after taxes
$36,480
$21,720
$67,516
$81,715
Depreciation
$79,200
$108,000
$36,000
$16,800
Net Operating CF
$115,680
$129,720
$103,516
$98,515
Explanation / Answer
Cash Outflow at Year 0 : 240000 + 33600 = 273600
Cash Inflow Year 1 = 115680 + ( 33600 - 1008) = 148272
Cash Inflow Year 2 = 129720 + ( 1008 - 1038) = 129690
Cash Inflow Year 3 = 103516 + ( 1038 - 1070 ) = 103484
Cash Inflow Year 4 = 98515 + ( 1070 -(-36716)) + 15000 = 151301
Present value of Inflows @ 10%
= 148272 / ( 1 + 0.1) + 129690 / ( 1 + 0.1)^2 + 103484 / ( 1 + 0.1)^3 + 151301/ ( 1 + 0.1)^4
= 423064.23
Net present value = Present value of inflows - Cash Outflow = 423064.23 - 273600 = 149464.23
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