Epsilon Products, Inc., (EPI) projects unit sales for a new device as follows:

Year Unit Sales

1 87,500

2 105,000

3 119,000

4 108,000

5 92,000

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Production of the device will require $1,000,000 in net working capital to start and additional net working capital investments each year equal to 9 percent of the projected sales increase for the following year. Total fixed costs are $1,450,000 per year, variable production costs are $250 per unit, and the units are priced at $350 each. The equipment needed to begin production has an installed cost of $24,000,000. This equipment qualifies as seven-year MACRS property, and the accounting department supplies you with the following depreciation figures:

Year MACRS Depreciation

1 3,429,600 (14.29%)

2 5,877,600 (24.49%)

3 4,197,600 (17.49%)

4 2,997,600 (12.49%)

5 2,143,200 (8.93%)

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In five years, this equipment can be sold for about 15 percent of its acquisition cost, and will have a book value of $5,354,400. EPI is in the 35 percent marginal tax bracket and has a required return on all its projects of 16 percent.

Determine the Payback Period, Internal Rate of Return and Net Present Value of this project.

If you can help do this in excel, provide the formula, and explain the steps that would help a lot. Thanks!!

Inpur area: Ye. Year 2 $105,000 Year $119,000 $108,000 Year $92,000 $87,500 $1,000,000 ********************111111111111 Unit Sales per year ............................. Initial NWC Additional NWC/year Fixed costs Variable cost per unit Unit price Equipment cost AAAAA $1.450,000 $250 $350 $24,000,000 15% 35% ................................................................ Tax rate Required return 16% Year 1 $3,429,600 14.29% Year 2 $5,877,600 MACRS depreciation per year 7-year MACRS Percentages Year 3 ***** 4,197,600 $ 17:49 Year 4 2,997,600 $ 12.4996 Year 5 2,143,200 8.93 ola TO DERRRRRR Output area: 10 1 2 Year End-of-Year book value 19 4 5 Aftertax salvage value: Sell old Taxes Aftertax salvage value 10 1 2 3 4 vol Year Sales Variable costs Fixed costs Depreciation EBIT Taxes NOPAT (Net Operating Profit After Taxes) Depreciation Operating cash flow Net cash flows Operating cash flow Change in NWC Capital spending Free cash flow Pay Back Period Internal rate of retum Net present value Discounted Cash Flows Sum of PV (NPV double-check) Years NOTE: The NPV forumla in excel must have the initial investment outside of the function, like this: NPVID17.549:149+D49 NOT NPMID 17,D49:149)