Galloway Corporation is considering whether to launch a new product line of pre-fabricated storage garages. The total investment needed to undertake the project is $5,000,000. This amount will be depreciated straight-line to zero over the 5-year life of the equipment. The salvage value is zero, and there are no working capital consequences. Galloway has a required return of 20 percent on new projects and is taxed at 25%. The selling price will be $60,000 per garage. The variable costs will be about half that, or $39,000 per garage, and fixed costs will be $655,000 per year. Beginning in year three (3), the variable costs are expected to decrease by 5% per year due to the firm gaining comfort in the new process. Please show all your work in a spreadsheet. All totals should be formula based (i.e. PV, NPV, Total Cash Flow, etc)

Using the template below, please provide/calculate the following: The NPV of the project at 100 units The NPV of the project at 150 units The Financial (i.e. economic) breakeven in units. Assume the 100 and 150 units are produced through the lifetime of the project (not yearly)

1 Required Return 20% 2 Tax Rate 25% 3 Discount Rate 9.5% 4 Net Present Ve 5 IRR A #NUM! ! 6 7 @ 100 units ######### Revenue ######### Variable Costs $ 655,000.00 Fixed Costs ######### Intial Investment $1,000,000.00 Annual Depreciation 10 1 2 3 13 Description 14 Operating Cash: 15 Operating Cash Inflow (after tax] 16 Other Cash Flows.... List here (an 17 18 - Taxes 19 After Tax Operating CF $0 $0 $0 $0 $0 $0 $0 20 21 (+) Depreciation Tax Shield Beni $0 $0 $0 $0 $0 23 Net Working Capital CF 24 NWC $0 26 Net Capital Expenditures: 27 Initial Investment 28 After-Tax Salvage $0 $0 $0 $0 $0 $0 30 Total After-Ta: 31 PV After-Tax CF's 1 Required Return 20% 2 Tax Rate 25% 3 Discount Rate 9.5% 4 Net Present Ve 5 IRR A #NUM! ! 6 7 @ 100 units ######### Revenue ######### Variable Costs $ 655,000.00 Fixed Costs ######### Intial Investment $1,000,000.00 Annual Depreciation 10 1 2 3 13 Description 14 Operating Cash: 15 Operating Cash Inflow (after tax] 16 Other Cash Flows.... List here (an 17 18 - Taxes 19 After Tax Operating CF $0 $0 $0 $0 $0 $0 $0 20 21 (+) Depreciation Tax Shield Beni $0 $0 $0 $0 $0 23 Net Working Capital CF 24 NWC $0 26 Net Capital Expenditures: 27 Initial Investment 28 After-Tax Salvage $0 $0 $0 $0 $0 $0 30 Total After-Ta: 31 PV After-Tax CF's