After spending $10,000 on client development, you have just been offered a big production contract by a new client. The contract will add $200,000 to your revenues for each of the next 5 years and it will cost you $100,000 per year to make the additional product. You will have to use some existing equipment and buy new equipment as well. The existing equipment is fully depreciated, but could be sold for $50,000 now. If you use it in the project, it will be worthless at the end of the project. You will buy new equipment valued at $30,000 and use the 5-year MACRS schedule to depreciate it. It will be worthless at the end of the project. Your current production manager earns $80,000 per year. Since she is busy with ongoing projects, you are planning to hire an assistant at $40,000 per year to help with the expansion. You will have to increase your inventory immediately from $20,000 to $30,000. It will return to $20,000 at the end of the project. Your companys tax rate is 21% and your discount rate is 15%. What is the NPV of the contract?

Complete the steps below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section.

PLZ show excell steps

$ Initial inventory $ 20,000 Investment Old equipment New equipment Tax rate Cost of capital $ $ $ 10,000 50,000 30,000 21% 15% 5 Depreciation Year MACRS Schedule Depreciation 0 20.00% 2 19.20% 3 11.52% 4 11.52% 32.00% 5.76% Change in NWC Year Net Working Capital Change in NWC Cash Flow 0 30,000 $ 1 30,000 $ 2 30,000 $ 3 30,000 $ 4 30,000 $ 5 20,000 $ 0 1 2 3 5 $ 200,000.00 $ 200,000.00 $ 200,000.00 $ 200,000.00 $ 200,000.00 $ -100,000.00 $ -100,000.00 $ -100,000.00 $ -100,000.00 $ -100,000.00 $ -40,000.00 $ -40,000.00 $ - 40,000.00 $ -40,000.00 $ -40,000.00 $ S S S S $ Free Cash flows Year Revenues Less: Costs Less: Salary Less: Depreciation Taxable Income Less: Tax Net Income Add back Depreciation Less: Capex Less: Opportunity Cost CF from Change NWC FCF S S S S S S S -30,000.00 $ S S S S S NPV