Question
Alfa Inc is in the 30 percent marginal tax bracket and has required return on all its projects of 15 percent. Based on these preliminary
Alfa Inc is in the 30 percent marginal tax bracket and has required return on all its projects of 15 percent. Based on these preliminary project estimates,
- Calculate the cash flows from the project in the table below. (6)
- What is the NPV of the project? (2)
(Round off the figures to nearest integer. Decimal figures not required)
MACR 7-year depreciation percentage
| Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
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| Depreciation (%) | 14.29% | 24.49 | 17.49 | 12.49 | 8.93 | 8.92 | 8.93 | 4.46 |
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Copy the following format on your notebook and solve. Structure is available. You have to plug in figures with the correct signand calculate project cash flows.
Excel submission is not allowed.
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| 0 | 1 | 2 | 3 | 4 | 5 |
| Sales (No. of units) |
| 10 | 8 | 11 | 12 | 9 |
| SP per unit |
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| VC per unit |
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| Sales Revenue |
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| Working capital |
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| Depreciation |
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| Sales |
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| Variable Cost |
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| Fixed Cost |
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| Depreciation |
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| EBIT |
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| Taxes (@ ) |
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| NOPAT |
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| Adjustments |
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| Equipment Cost |
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| Depreciation |
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| Working Capital Changes |
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| After tax Salvage |
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| Total Cash Flows |
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(Hint: Coefficient of Variation = SD/Expected Return and
Expected Cash flows can be taken as same for all three years for NPV calculation)
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Financial Management Theory And Practice
Authors: Prasanna Chandra
9th Edition
9339222571, 978-9339222574
