Finance 440- Net Present Value problem. Homework help needed to do cash flows, NPV and fill out chart for 10-year probect (in attachment).

Finance 440 Net Present Value Kringle Kringle Plastics, Inc., has an opportunity to purchase a new, more efficient press, Model L, to replace an old press, Model S, now in use. KPI's vice-president in charge of purchasing has reported that the new press, Model L, will cost $68,500. It has an expected 10 year useful life. It will be depreciated over that time with straight line depreciation. It is not expected to have any salvage value. From an examination of the company's books, you have determined that Model S, which was purchased 3 years ago for $56,000, is being depreciated on a straight line basis over an original 7 year life. It is expected to have a zero salvage value at the end of its 7 year life. The demand in the market for older presses is such that Model s could be sold today for $23,000. KPI will be able to decrease inventories by $7,000, and accounts payable will also decline by $4,000 per year for the life of the Model L. If Model L is purchased now, the company will be able to reduce operating costs by $10,800 in the first year of Model L's service. Operating costs are expected to increase by 5 percent per year over the life of the plant, therefore, the cost savings would also increase by 5 percent per year during the next 10 years. KPI's income tax rate is 40%; its long term capital gain rate is 30%; and Model L is eligible for a 10% investment tax credit. The company expects to be able to raise new debt with a 10% coupon rate. It estimates the required return on its equity to be 18%. It wishes to maintain a 50/50 debt to equity mix in its capital structure. Should KPI replace Model S with Model L? Regular tax Line -> 10%% of model L to claim at time zero.kringle Net Investment Straight Line Final year adjustments Sale of old Assets Terminal Value Depreciation Cost Base Salvage Value Selling price Final cash flow Installation Years Tax effects Book value Discount rate Expenses Payment Recovery of NWC Tax gain/loss Growth rate Initial Additional WC Tax credit/liability Terminal value Note: Each problem you encounter will have different items to consider. For example, there will be either final year adjustments or terminal value, not both. Free Cash Flows Year 1 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Revenue - Operating Costs - Other Incremental Costs - Depreciation - Opportunity Costs/Other = EBIT - Taxes = EBIAT + Depreciation +/- Working Capital +/- Capital Expenditures Free Cash Flows Discount Free Cash Flows with WACC Present Value of Free Cash Flows Sum of Present Values of Free Cash Flows - Net Investment Net Present Value