A B C D E F G H 7-Additional sales units expected in years 3 and 4 B No additional investment in fixed assets, fixed costs or net working capital D O Determine the NPV of the expansion AND the PV of the INFLOWS ONLY for use in the option evaluation 1 2 Part 1. Expansion data 13 4 Investment to be made in year 2 (000) 15 Additional sales units in years 3 & 4 16 Additional NWC 7 Change in depreciation 18 19 Part 2. Projected Net Cash Flows of Expansion 20 21 Investment Outlays at Time Zero: 22 Investment 23 Operating Cash Flows over the Project's Life: 24 Additional units sold 25 Sales price (from years 3 and 4 from Part 1) 26 Variable costs (from years 3 and 4 from Part 1) 27 28 Sales revenue 29 Variable costs 30 Oper. income before taxes (EBIT) 31 Taxes on operating income (25%) 32 Net Cash Flow (Time line of cash flows) 33 CASH INFLOWS ONLY 34 35 Part35. Key Output: NPV and PV of Expansion 36 37 Net Present Value 38 Present Value of INFLOWS ONLY 39 40 Years $1,200 250 0 Tax rate WACC 0 1 2 3 4 25% 11% $26.01 $20.81 $26.53 $21.22 - +