-23. A project for a new telephon terminated with no ($0) m to produce another p

Question

-23. A project for a new telephon terminated with no ($0) m to produce another product. The project had the following cash flows in actuäl d The company uses a real interest rater" = 15% for to maintain at a 3% average. The telephonedistribution company uses oject for a new telephone distribution plant did not vield estimated sales and is being erminated with no (50) market value, because the teleghon euacal do ill be converted in actual dollars this product, and inflation is ex pected MACRS cash actual dollar epreciation and has a combined tax rte is 45%. Estimate the after tax present worth in real dollars. Cash flows are in actual dollar × S 1,000. Actual S cash flows, convert the actual dollar cash flows to real dollars, and compute the net Taxable After Tax O&M; Year Init Cost Revenues Year Init Cost Revenues Costs Depr. Income 20 Costs Depr Income Taxes Cash Flow. Reals 0 (S20,000) S15,000 $10,000 $15,000 $10,000 $15,000 $10,000 Book Value Depr Recapture/Loss NPW =

Explanation / Answer

Year Acutal init cost Revenue O&M Dep Taxable income Tax PAT Depreciatoin Cashflow Dis factor Dis CF 0 -20000 1 (20,000.00) 1 15000 10000 6666 -1666 -749.7 -916.3 6666 5749.7 0.86956        4,999.71 2 15000 10000 8890 -3890 -1750.5 -2139.5 8890 6750.5 0.75614        5,104.32 3 15000 10000 2962 2038 917.1 1120.9 2962 4082.9 0.65751        2,684.55 NPV     (7,211.42)

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