Ganges Express, a package delivery company, operates a fleet of Volvo trucks at one terminal where the lease of 175,000 euros per year is expiring. They had planned to set up another lease with Volvo for next three years at a cost of 200,000 euros per year in operating expenses. This is the total cost for the entire fleet. A Scania sales rep just called to offer a discounted price of 600,000 euros for Ganges to purchase a new fleet. If the new fleet is purchased, then Ganges expects to sell the Scania trucks at book value at the end of three years. They use straight-line depreciation over 5 years for new vehicles. Assume the tax rate is 40% and the discount rate for Ganges Express is 10%. Ignore inflation.

(1a) What is the projected EBIT for year 1 in thousands of Euros?

(1b) What is the projected EBIT for year 2 in thousands of Euros?

(1c) What is the projected EBIT for year 3 in thousands of Euros?

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(2) We next want to find the projected Net Capital Expenditures immediately and for years 1-3. Note that this is the number subtracted from NOPAT in the FCF formula, so an expenditure would be a POSITIVE number and income from salvaging capital equipment would be a NEGATIVE number.

(2a) What are the projected Net Capital Expenditures immediately in thousands of Euros?

(2b) What are the projected Net Capital Expenditures for year 1 in thousands of Euros?

(2c) What are the projected Net Capital Expenditures for year 2 in thousands of Euros?

(2d) What are the projected Net Capital Expenditures for year 3 in thousands of Euros?

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(3) We next want to find the projected Free Cash Flows immediately and for years 1-3.

(3a) What are the projected Free Cash Flows immediately in thousands of Euros?

(3b) What are the projected Free Cash Flows for year 1 in thousands of Euros?

(3c) What are the projected Free Cash Flows for year 2 in thousands of Euros?

(3d) What are the projected Free Cash Flows for year 3 in thousands of Euros?

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(4) We next want to look at the discount rate under which Ganges Express would purchase the Scania trucks.

(4a) What is the highest discount rate under which Ganges Express would choose to purchase the Scania trucks?

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(5) To conclude this analysis, we what want to calculate the Payback Period for the purchase of Scania trucks.

(5a) What is the Payback Period for the purchase of Scania trucks?