69 10. 2 134,500 91,500 Production of the implants will require $1,650,000 in ne
ID: 2781642 • Letter: 6
Question
69 10. 2 134,500 91,500 Production of the implants will require $1,650,000 in net working capital to start and additional net working capital investments each year equal to 10 percent of the projected sales year. Total fixed costs are $1,500,000 per year, variable production costs are $240 per unit, and the units are at $360 each. The needed to begin production has an installed cost of $30,500,000. Because the implants are intended for professional singers, this seven-year MACRS MAGRS Tabia) property Iin five years, this equipment can be sold for about 10 percent of its acquisition cost AAl is in the 30 percent marginal tax bracket and has a required return on all its projects of 15 percent What is the NPV ot the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g.32.16) Net present value 700.87 40 What is the IRR of the project? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 32.16.) Internal rate of retum References eBook & Resources 22:16 | 10 ,2017/11/5 WindowsExplanation / Answer
NPV formula in excel npv(15%, only cash flow year 1-5 fields) PLUS initial investment -32150000
IRR all the rows including initial investment
after tax salvage value
slavge value (10% on cost) + bookvalue year 5 after depreciation of each year ((6804550-3050000)*30%
year 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 Unit sales 115500 134500 122500 105500 91500 price per unit 360 41580000 48420000 44100000 37980000 32940000 varaible cost 240 per unit 27720000 32280000 29400000 25320000 21960000 Fixed cost 1500000 1500000 1500000 1500000 1500000 MACRS on 30500000 14.29% 24.49% 17.49% 12.49% 8.93% depreciation 4358450 7469450 5334450 3809450 2723650 EBT 8001550 7170550 7865550 7350550 6756350 Tax @ 30% 2400465 2151165 2359665 2205165 2026905 Net income 5601085 5019385 5505885 5145385 4729445 operating cash flow Net income 5601085 5019385 5505885 5145385 4729445 depreciation 4358450 7469450 5334450 3809450 2723650 OCF 9959535 12488835 10840335 8954835 7453095 Total cash flow sales increase -6840000 4320000 6120000 5040000 NWC -1650000 -684000 432000 612000 504000 786000 Capital spending -30500000 after tax salvage value 4176365 Total cash flow -32150000 9275535 12920835 11452335 9458835 12415460 NPV 4796583.81 IRR 21.01%Related Questions
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