1.Estimate the incremental cash flows to be received from this project.

2.Using the incremental cash flows, compute the following and the state in each case whether the company should go head with the project.

a.Payback

b.NPV

C.IRR

d.Profitability Index

7 . Estimate the incremental cash flows to be received from this project . 2 . Using the incremental cash flows , compute the following and the state in each case whether the company should go head with the project . d . Payback NPV IRR d . Profitability Index Projected Net Cash Flows Estimation Statement OYr 1Yr 2 Yr 3 Yr 4Yr 2015 2016 2017 2018 2019 Investment Outlays Buildings Equipment $ 12, 000 $ 8, 000 Operating Cash Flow Over the Project's Life* Unit Sold $20, 000| $20 , 000 $20, 000 $20 , 000 Sales Price $ 3.00 $ 3.12 Sales Revenue $ 3. 06 $ 3. 18 $ 60 , 000| $ 61 , 200 $ 62 , 424 $ 63 , 672 Variable Costs $ 42 , 000 | $ 42, 840 $ 43 , 697 $ 4 4 , 571 Fixed Operating Costs $ 8000 $ 8080 $ 8161 $ 8242 Depreciation ( building ) $ 156 $ 312 $ 312 $ 312 Depreciation ( equipment ) $ 1600 $2560 $ 1520 $960 Operating Income before taxes $8244 $7408 $8734 $9587 ( EBIT ) Taxes on operating income ( 40% ) $3298 $2963 $3949 $3835 Net Operating profit after taxes $4946 $4445 $5241 $5752 ( NOPAT ) Add back depreciation $1756 $2 , 872 $1 , 832 $1 , 272 Operating cash flow \$ 6 , 702\ \$ 7 , 317 $ 7 , 073 $ 7 , 024 Cash Flows Due to Net Operating Working Capital OS Net Operating Working Capital $ 6, 000 | $ 6, 120 |$ 6 , 242 $ 6, 367\ ( based on sales ) Cash Flows due to investment in ( $6 , 000 ) \ ( $ 120 ) ( $122 ) ($125 ) $6367 NOWC Salvage Cash Flows : Long Term Asset Net Salvage Cash Flows : Building $ 8, 863 Net Salvage cash flow : Equipment $ 1 , 744 Total Salvage cash flows $ 10 , 607\ Net Cash Flow ( Time Line of cash ( $26 , 000 )| $6 , 582 $ 7 , 194 $ 6, 948 $ 23, 999 flows )