5 1. Learning Objectives (a) Develop proforma Project Income Statement Using Excel Spreadsheet 7 (b) Compute Net Project Cash flows, NPV, IRR and PayBack Period 8 (c) Develop Problem-Solving and Critical Thinking Skills 9 10 111) Life Period of the Equipment = 4 years 12 2) New equipment cost 133) Equipment ship & install cost 14 4) Related start up cost 15 5) Inventory increase 16 6) Accounts Payable increase 17 7) Equip. Salvage Value Estimated 18 End of Year (fully depreciated) 19 20 21 ESTIMATING Initial Outlay (Cash Flow, CFO, T= 0) 22 23 YEAR 24 25 Investments: 281) Equipment cost 27 2) Shipping and Install cost 283) Start up expenses 29 30 4) Net Working Capital 31 Inventory Inc.- Acct. Payable Inc. 32 33 Total Initial Outlay Total Basis Cost (1+2+3) 34 35 Operations: 06 Revenue 37 Operating Cost 38 Depreciation 00 EBIT 40 Taxes 41 14 15 Net Income (LOSS) 12 43 Add back Depreciation TO 31 TAX SHIELD DUE TO LOSS Total Operating Cash Flow 16 17 Terminal (END of 4th YEAR) 1) Release of Working Capital 2) Salvage value (after tax) Total Sheet1 Shoein $ $ $ $ $ $ 5555 $ $ $ S D 8) Sales for first year (1) (221,000) 9) Sales increase per year (35,000) 10) Operating cost: CF0 Q -60% (5,000) (60 Percent of Sales 25,000 11) Depreciation (Straight Line)/Y S 5,000 12) Tax rate 15,000 13) Cost of Capital (WACC) (221,000) (35,000) (5,000) (261,000) (20,000) $ (281,000) CF1 1 S $ CF2 2 - $ $ G ####* $(60,000) $(60,000) $ (60,000) $ XXXXX XXXXXXXXXX XXXXXXXXX CF3 3 $ $ xxXxXxXxxxXxxxXxx xxxXXXXX XXXXXXX XXXXXXXXX $ 200,000 28% $ (120,000) I CF4 4 (60,000) XXXXXXXX (60,000) 35% 10% XXXXXXXXX $ 20,000