Question
A company is going to purchase an existing plant for $100million. The expexted sales prie of the plant is $50 million at t = 4.
A company is going to purchase an existing plant for $100million. The expexted sales prie of the plant is $50 million at t = 4. The additional working capital requirements and proforma income statement information are in the next table. What is the NPV of this investment if the oppotunity cost of capital is 10% and the tax rate is 35% ?
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | |
| Fixed Assets | |||||
| Purchase of facorty ( sale in 4 Years) | $100,000.00 | $0.00 | $0.00 | $0.00 | $50,000.00 |
| Working Capital | |||||
| CF from Inventory (- Buildup, + sell off) | $0.00 | -$20,000.00 | -$10,000.00 | $10,000.00 | $20,000.00 |
| CF from acconts receivable | $0.00 | -$35,000.00 | $25,000.00 | $30,000.00 | $30,000.00 |
| Operations | |||||
| Revenues | $0.00 | $120,000.00 | $125,000.00 | $150,000.00 | $150,000.00 |
| Expenses | $0.00 | $60,000.00 | $61,250.00 | $70,000.00 | $70,000.00 |
| depreciation | $0.00 | $12,500.00 | $12,500.00 | $12,500.00 | $12,500.00 |
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Small Business Management Launching and Growing New Ventures
Authors: Justin Longenecker, Leo Donlevy, Terri Champion, William Petty, Leslie Palich, Frank Hoy
6th Canadian edition
176532218, 978-0176532215
