B F SAS Co.has a project for selling a Drilling Units to Saudi Aramco and their management appoint you as a SuperBrain Analyst to check this investment opportunity. Given the below assumptions, do the calculation in order to solve for NPV, IRR, PI and Payback. Given the investment criteria we discussed in class, what will be your investment recommendation and why. Assumptions extracted the Feasibility-Study Start Price per unit $90 Pro Forma Information 4 Price Decrease After Year Price after year 4 Year Units $80 Year 1 + 2 3 A Projected Unit Sales 13,000 15,000 16,000 16,500 16,000 15,000 14,000 13,000 5 6 7 VC each year $55 VC = Variable Cost Cost Increases After Year 5 Cost after year 5 $60 Total Fixed Cost Each Year $35,000 NWC= Net 3 NWC requirement at start $15,000 Working Capital NWC requirement during each year is 17.00% of previous year's 24 estimated sales. 0.17 25 Initial Cost Equipment $1,100,000 MACRS = Modified Accelerated Cost 26 Depreciation Method MACRS Recovery System 27 Property Type Industrial Equipment 28 Class 7-Year 29 # of years until sell Equipment 8 30 Value as % in 8 years 0.1 Selling Price for the equipment at 31 32 Relevant Marginal Tax Rate 0.34 the 8th year 33 Full Cash Flows At Time of Sale RRR 34 35 36 RRR=Required 0.2 Rate of Return B F SAS Co.has a project for selling a Drilling Units to Saudi Aramco and their management appoint you as a SuperBrain Analyst to check this investment opportunity. Given the below assumptions, do the calculation in order to solve for NPV, IRR, PI and Payback. Given the investment criteria we discussed in class, what will be your investment recommendation and why. Assumptions extracted the Feasibility-Study Start Price per unit $90 Pro Forma Information 4 Price Decrease After Year Price after year 4 Year Units $80 Year 1 + 2 3 A Projected Unit Sales 13,000 15,000 16,000 16,500 16,000 15,000 14,000 13,000 5 6 7 VC each year $55 VC = Variable Cost Cost Increases After Year 5 Cost after year 5 $60 Total Fixed Cost Each Year $35,000 NWC= Net 3 NWC requirement at start $15,000 Working Capital NWC requirement during each year is 17.00% of previous year's 24 estimated sales. 0.17 25 Initial Cost Equipment $1,100,000 MACRS = Modified Accelerated Cost 26 Depreciation Method MACRS Recovery System 27 Property Type Industrial Equipment 28 Class 7-Year 29 # of years until sell Equipment 8 30 Value as % in 8 years 0.1 Selling Price for the equipment at 31 32 Relevant Marginal Tax Rate 0.34 the 8th year 33 Full Cash Flows At Time of Sale RRR 34 35 36 RRR=Required 0.2 Rate of Return