What are the cash flows for each year? help me out 3-year project Unit sale = 1500 per year Price = $50 Variable cost = $20 per unit Fixed cost = $5000 per year FCInv = $60000 Depreciated straight-line over three years to book value of zero NWCinv= $15000 Salvage value at end of three years= $10000 Marginal tax rate= 40% Cost of capital = 15% Final answer is NPV=$11871 and IRR=23,5% but they show no calc
Year 0 1 2 3 Fixed Capital Investment (60,000.00) Net working capital (15,000.00) Total (75,000.00) Number of units 1,500.00 1,500.00 1,500.00 Price per unit 50.00 50.00 50.00 Sales 75,000.00 75,000.00 75,000.00 VC per unit 20.00 20.00 20.00 Total Cost 35,000.00 35,000.00 35,000.00 Depreciation 20,000.00 20,000.00 20,000.00 Operating Income before taxes 20,000.00 20,000.00 20,000.00 Taxes on operating income 8,000.00 8,000.00 8,000.00 Operating income after tax 12,000.00 12,000.00 12,000.00 Add back depreciation 20,000.00 20,000.00 20,000.00 After tax OCF 32,000.00 32,000.00 32,000.00 After tax salvage value 6,000.00 Return of NWC 15,000.00 Total CF (75,000.00) 32,000.00 32,000.00 53,000.00 Discount rate 15% NPV 11,871.04 IRR 24% I.E. Year 0 : -75K Year 1: 32K Year 2: 32K Year 3: 32K + (1-0.4)*10K + 15K = 53K I can send you my excel spreadsheet iff you want
hey thanks no need for spreadsheet, I wasn’t adding the tnocf to year3 got it right now