I am having difficulty figuring out the accurate depreciation and ATCF for the attached sheet. I know what the numbers are supposed to be (which are manually inserted into the project calculation sheet at the bottom), but I can't make my equations towards the top match. The problem areas are in the blue highlighted areas. What am I doing wrong?

NOTE: I corrected the name of the attachment to avoid confusion. Sorry.

FIN201.31 Principles of Finance Prof. Williams Georgia Lynnette Karagines Unit 6; Case Problem 6 Sheet 10 of 10 12-13 Project Cash Flows You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $400 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $165,000 in assets, which will be depreciated straight-line to zero over the 3-year project life. The actual market value of these assets at the end of year 3 is expected to be $35,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 34 percent and the required return on the project is 10 percent. What will the cash flows for this project be? The cash flows for the project will be: INFO GIVEN: Year 0 Year 1 Year 2 Year 3 = = = = Price/Unit $400.00 -$245,000.00 $38,851.87 $91,073.13 $244,187.50 Units/Year 1 1000 Units/Year 2 1250 Variable Costs per Unit $225.00 Depreciation Stright-Line to Zero over 3 yr After-Life Value $35,000 NWC 20% Year 1 $43,333 Year 2 $43,333 Year 3 $43,333 Depreciation Depreciable base - = $43,333.33 Step 2: = Find ATCF $165,000 Tax Rate 34% Required Return 10% Ending Book Value Life of Asset - $35,000 3 ATCF $35,000.00 = = = = ATCF = Step 3: Book Value + $35,000.00 + $35,000.00 + $35,000.00 $35,000.00 Year 0 Sales of New Product LESS: Variable Costs LESS: Fixed Costs LESS: Depreciation (use MACRS Depriciation table) EBIT (earnings before interest and taxes) LESS: Taxes Net Income PLUS: Depreciation Operating Cash Flow Change in Net Working Capital Change in Fixed Assets LESS: Investment in Operating Capital FCF = OFC - IFC Project Life 3 Fixed Cost per Year $100,000 Equipment $165,000 STEP 1: Units/Year 3 1325 ( ( ( + Market Value - Book Value $35,000.00 - $35,000.00 $0.00 0.00 Year 1 ) ) ) x x x Year 2 ( ( ( 1 1 66.00% Tc 34.00% Year 3 $0.00 $400,000.00 $500,000.00 $530,000.00 0 0 0 $0.00 0 $0.00 0 $0.00 $225,000.00 $281,250.00 $298,125.00 100,000.00 27,505.50 $47,494.50 16,148.13 $31,346.37 27,505.50 $58,851.87 100,000.00 54,994.50 $63,755.50 21,676.87 $42,078.63 54,994.50 $97,073.13 100,000.00 54,994.50 $76,880.50 26,139.37 $50,741.13 54,994.50 $105,735.63 $80,000.00 $20,000.00 $6,000.00 -$106,000.00 $165,000.00 $0.00 $0.00 -$32,451.87 245,000.00 -$245,000.00 20,000.00 $38,851.87 6,000.00 $91,073.13 (ATCF) -138,451.87 $244,187.50 ) ) )