Question
A new 3-year project will require an investment in equipment with a purchase price of $300,000 . The equipment will be depreciated straight-line to zero
| A new 3-year project will require an investment in equipment with a purchase price of $300,000. The equipment will be depreciated straight-line to zero over its three-year tax life, after which time it will worth $50,000. | |||||||||
| The project is expected to produce sales of: | |||||||||
| Year 1 | $300,000 | ||||||||
| Year 2 | $350,000 |
| |||||||
| Year 3 | $500,000 | ||||||||
|
| |||||||||
| Costs are expected to total 60% of sales. | |||||||||
| The project requires an initial investment in net working capital of $275,000 which will be recouped at the end of the project | |||||||||
| The tax rate is | 21% | ||||||||
| The weighted average cost of capital is | 12% | ||||||||
| Show the projects: | |||||||||
| a) Complete the Table Below | |||||||||
| c) Calculate Net Present Value | |||||||||
| d) Calculate IRR | |||||||||
|
| |||||||||
| Cash Flows: | Year 0 (today) | Year 1 | Year 2 | Year 3 | |||||
| Sales | |||||||||
| Costs | |||||||||
| Depreciation | |||||||||
| EBIT | |||||||||
| Taxes | |||||||||
| Net Income | |||||||||
| Operating Cash Flow | |||||||||
| NWC | |||||||||
| Equipment | |||||||||
| Cash Flows | |||||||||
| NPV | |||||||||
| IRR | |||||||||
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Securitisation Derivatives A Practioner's Handbook
Authors: Mark Aarons, Vlad Ender, Andrew Wilkinson
1st Edition
1119532272, 978-1119532279
