B C D E H J K L M N A Problemi 6 7 Year 0 Year 1 Year 2 Year 3 8 Revenue 9 Summer Tyme, Inc. has cash available and is considering a new three-year expansion project that requires an initial fixed asset investment of $35.25 million. The fixed assets will be depreciated straight-line to zero over its three-year tax life. The fixed assets will have a market value of $20,842,900 at the end of the project. The project is estimated to generate following revenues during those three years: 520,640,300 for year one, $24,450,221 for year two, and $28,155,015 for year three. Costs are equal to 60% of the same year sales. The project net working capital is equal to 7.5% of the next year's revenue. The tax-rate is 21%. What are the project's net cash flows for years 0-3? What is the IRR on this project? 10 11 Expenses Depreciation | EBIT Taxes Net Income (NI) OCF 12 13 Use available Excel template and complete using "best practices" (use formulas - no hardcoding in model) This means that every cell must be calculated inside of excel! Do not use your calculator and then just type in numbers. If you need help use the excel help function or youtube! 14 15 16 17 18 NWC total Change in NWC Net Capital Spending CFFA Project IRR 19 20 Revenue t=1 21 Revenue t-2 22 Revenue t=3 23 Investment 24 Depr. years 25 Final book value 26 Fixed Asset Sale value 27 NWC required $ 20,640,300 $ 24,450,221 $ 28,155,015 $ 35,250,000 3 $ $ 20,842,900 7.50% You may use positive or negative numbers in this section below in any consistent manner. Please make sure your Excel formulas are consistent and that your cash flow numbers are correct. SL Problem 2 Use Excel formulas for a) and c) below Year o $ (15,850,210) Year 1 Year 2 Year 3 6,850,793 $7,521,160 $4,230,225 Total Cash Flow 28 Costs 60.00% Discount rate 12.50%) Tax rate 21.00% a) NPV b) Accept/Reject 29 30 31 32 33 34 c) IRR 35