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a. Complete the table below, solving for the project's net cash flows over its five-year estimated life. 0 1 2 3 4 5 Equipment cost
| a. Complete the table below, solving for the project's net cash flows over its five-year estimated life. | |||||||||
| 0 | 1 | 2 | 3 | 4 | 5 | ||||
| Equipment cost | -$36,000,000 | ||||||||
| Net revenues | $9,000,000 | $9,252,000 | $9,511,056 | $9,777,366 | $10,051,132 | ||||
| Less: | Maintenance costs | -$200,000 | -$205,600 | -$211,357 | -$217,275 | $223,358 | |||
| Utilities costs | -$100,000 | -$102,800 | -$105,678 | -$108,637 | -$111,679 | ||||
| Supplies | -$250,000 | -$257,000 | -$264,196 | -$271,593 | -$279,198 | ||||
| Depreciation | -$7,200,000 | -$11,520,000 | -$6,840,000 | -$4,320,000 | -$3,960,000 | ||||
| Operating income | $1,250,000 | -$2,833,400 | $2,089,825 | $4,859,860 | $5,476,896 | ||||
| Taxes | $264,375 | -$599,264 | $441,998 | $1,027,860 | $1,158,363 | ||||
| Net operating income | $985,625 | -$2,234,136 | $1,647,827 | $3,832,000 | $4,318,532 | ||||
| Depreciation | $7,200,000 | $11,520,000 | $6,840,000 | $4,320,000 | $3,960,000 | ||||
| Plus: After-tax equipment salvage value* | $3,610,840 | ||||||||
| Net cash flow | -$36,000,000 | $8,185,625 | $9,285,864 | $8,487,827 | $8,152,000 | $11,889,372 | |||
| b. What are the project's NPV and IRR? (Assume that the project has average risk.) | |||||||||
| The Project NPV is | -35082.42 | ||||||||
| The Project IRR is | 8.36% |
1.How was the After tax equipment salvage value calculated?
2. Can you please explain how the NPV was gotten and the rate applied?
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Financial Accounting Theory And Analysis Text And Cases
Authors: Richard G Schroeder, Myrtle W Clark, Jack M Cathey
13th Edition
1119577772, 9781119577775
