Garca and Martinez manufacture widgets and currently have $12 million in taxable income. The company recently spent $250,000 to

put together a bid for a government contract, and this morning they were notified that they won the contract. The contract requires

the firm to provide 70,000 widgets a year for 6 years, and the government will pay $25 for each widget. To satisfy the new contract,

Garca and Martinez estimate they will need an additional $6,000,000 worth of machinery. The machinery costs $150,000 a year to

operate and maintain. Garca and Martinez plan to depreciate the machinery over the 6 years to the expected salvage value of

$700,000. The company will immediately need to invest $500,000 in inventory, an amount that will be maintained over the six years.

Similarly, the company must hold an additional $50,000 in cash over the projects life. Both investments will be recovered when the

project is completed. The marginal cost of producing a widget is $5.00 and the cost of capital is 16%.

Find

1) Net Capital Spending

2) Change in net working Capital

3) Operating Cash Flow

4) Cash Flow From Assets

5)NPV

The following is how I approached the question

	Period 0	Period 1	Period 2	Period 3	Period 4	Period 5	Period 6				Information/Variables
Revenues		$1,750,000.00	$1,750,000.00	$1,750,000.00	$1,750,000.00	$1,750,000.00	$1,750,000.00			$12,000,000.00	Company's Other Taxable Income
Variable Costs		$350,000.00	$350,000.00	$350,000.00	$350,000.00	$350,000.00	$350,000.00			$250,000.00	Cost to develop bid
Fixed Costs/Expenses		$150,000.00	$150,000.00	$150,000.00	$150,000.00	$150,000.00	$150,000.00			$25.00	Price per unit
EBITDA		$1,250,000.00	$1,250,000.00	$1,250,000.00	$1,250,000.00	$1,250,000.00	$1,250,000.00			70,000	Units Sold
Depreciation		$2,000,000.00	$1,333,333.33	$888,888.89	$592,592.59	$395,061.73	$90,123.46			$500,000.00	Inventory
EBIT		-$750,000.00	-$83,333.33	$361,111.11	$657,407.41	$854,938.27	$1,159,876.54			16%	Cost of Capital
Taxes		-$262,500.00	-$29,166.67	$126,388.89	$230,092.59	$299,228.40	$405,956.79			$5.00	Labor & Materials (per unit)
OCF		$1,512,500.00	$1,279,166.67	$1,123,611.11	$1,019,907.41	$950,771.60	$844,043.21			$6,000,000.00	Machinery
Change NWC	-$550,000.00	-$50,000.00	-$50,000.00	-$50,000.00	-$50,000.00	-$50,000.00	$750,000.00			$150,000.00	Machinery maintenance costs
Net Capital Spending	-$6,400,000.00						$700,000.00			$50,000.00	Increase in Cash Balance
CFFA	-$6,950,000.00	$1,462,500.00	$1,229,166.67	$1,073,611.11	$969,907.41	$900,771.60	$1,594,043.21			6	Project Life (years)
										$700,000.00	Salvage Value
PV (CFFA)		-$1,059,626.44	-$913,471.07	-$687,817.20	-$535,671.23	-$428,869.09	-$654,262.69			35%	Marginal Tax Rate
		IRR	NPV	Decision
	Units Sold		$ (9,751,557.90)			Taxable Income		Tax Rate
	$60,000					$ -	$ 50,000	15%
	$65,000					$ 50,000.00	$ 75,000	25%
	$70,000					$ 75,000.00	$ 100,000	34%
	$75,000					$ 100,000.00	$ 335,000	39%
	$80,000					$ 335,000.00	$ 10,000,000	34%
	$85,000					$ 10,000,000.00	$ 15,000,000	35%
	$90,000					$ 15,000,000.00	$ 18,333,333	38%
	$95,000					$ 18,333,333.00	Above $18,333,333	35%
	$100,000
						Note: Corporate taxes are now flat at 21%. I have kept the old corporate tax table in this example to illustrate the VLOOKUP/HLOOKUP function. In addition, personal taxes are still based on similar tables, and many states also have tax tables like the one above.
	NPV with Tax Changes

Can you please evaluate and let me know if I am wrong?