Can anyone explain to me how to get the NPV for this problem? I need to plug it
ID: 2693775 • Letter: C
Question
Can anyone explain to me how to get the NPV for this problem? I need to plug it into excel so if you could tell me how to do that as well, it would be greatly appreciated. Thanks! DATA Coxt of plant and equipment 7,900,000 Shipping and installation 100,000 Tax rate 34% Required rate of return 15% Sales Price per unit (yrs 1-4) 300 Sales Price per unit (yr 5) 260 Variable cost per unit 180 Annual fixed cost 200,000 Depreciation life 5 Section 1: Calculate EBIT Year 1 2 3 4 5 Units Sold 70,000 120,000 140,000 80,000 60,000 Sales Revenue 21,000,000 36,000,000 42,000,000 24,000,000 15,600,000 Less: Variable Costs 12,600,000 21,600,000 25,200,000 14,400,000 10,800,000 Less: Fixed Costs 200,000 200,000 200,000 200,000 200,000 Equals: EBDIT 8,200,000 14,200,000 16,600,000 9,400,000 4,600,000 Less: Depreciation 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 Equals: EBIT 6,600,000 12,600,000 15,000,000 7,800,000 3,000,000 Taxes 2,244,000 4,284,000 5,100,000 2,652,000 1,020,000 Section 2: Calculate Operating Cash Flow EBIT 6,600,000 12,600,000 15,000,000 7,800,000 3,000,000 Less: Taxes 2,244,000 4,284,000 5,100,000 2,652,000 1,020,000 Plus: Depreciation 1,600,000 1,600,000 1,600,000 1,600,000 1,600,000 Operating Cash Flow 5,956,000 9,916,000 11,500,000 6,748,000 3,580,000 Section 3: Calculate Net Working Capital Revenue: 21,000,000 36,000,000 42,000,000 24,000,000 15,600,000 Initial Working Capital Requirement 100,000 Net Working Capital Needs: 2,100,000 3,600,000 4,200,000 2,400,000 1,560,000 Liquidation of Working Capital 1,560,000 Change in Working Capital: 100,000 2,000,000 1,500,000 600,000 (1,800,000) (2,400,000) Section 4: Calculate Free Cash Flow Operating Cash Flow 5,956,000 9,916,000 11,500,000 6,748,000 3,580,000 Minus: Change in Net Working Capital 100,000 2,000,000 1,500,000 600,000 (1,800,000) (2,400,000) Minus: Change in Capital Spending 8,000,000 0 0 0 0 0 Free Cash Flow: (8,100,000) 3,956,000 8,416,000 10,900,000 8,548,000 5,980,000 PV = 3,440,000 6,363,705 7,166,927 4,887,347 2,973,117 NPV= ??????? IRR = 77%Explanation / Answer
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