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I need help with a worksheet that involves depreciation, payback period, discounted payback period, net present value, internal rate of return, and profitability index. Frank
I need help with a worksheet that involves depreciation, payback period, discounted payback period, net present value, internal rate of return, and profitability index.
Frank Smith Plumbing Data Needed for analysis: Year-1 Year-2 Project Cost of Capital (borrowing) 7.50% Cost of Truck $185,000 Cost of additional equiment attached to truck $25,000 Tax rate 25% Annual Before Tax & Depreciation Truck Projected Earnings $70,000 $70,000 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 $65,000 $60,000 $55,000 $50,000 $40,000 $30,000 5.8% 0.0% 0.0% Year-6 $50,000.00 Year-7 $40,000.00 0.00 Year-8 $30,000.00 0.00 Depreciation Percentage Rate (MACRS)* 20.0% 32.0% 19.2% 11.5% 11.5% * The proposed truck has an estimated economic life of seven years but will be treated as a five-year MACRS property for depreciation purposes. Calculate the following -- light yellow highlighted cells need to be completed Year-0 Annual Before Tax & Depreciation Truck Projected Earnings Depreciation Expense Annual Before Tax Truck Projected Earnings Tax Annual Projected Truck Earnings Year-1 $70,000.00 Year-2 $70,000.00 Year-3 $65,000.00 Depreciation to add back Projected Truck Net Cash Flow $210,000.00 Decision Criteria: Pay Back Period Discounted Pay Back Period (DPB)** Net Present Value Internal Rate of Return Profitability Index Years Years Discounted Cash Flow Needed for DPB Calc. Recommendations: ATCF = Book value + (Market value - Book value) x (1 - T) Profitibility Index Year CF PV(CF) 0 $ (210,000.00) $(210,000.00) 1 $70,000.00 $65,116.28 2 $70,000.00 $65,116.28 3 $65,000.00 $60,465.12 4 $60,000.00 $55,813.95 5 $55,000.00 $51,162.79 6 $50,000.00 $46,511.63 7 $40,000.00 $37,209.30 8 $30,000.00 $27,906.98 $409,302.33 P = (Cash Inflows) / Initial Outflow Pi = 409,302.33 / 210,000 1.9491 Straight line depreciation Purchase cost - estimated salvage value = Depreciable asset cost period / useful life = depreciation rate per year Depreciation rate x Depreciable asset cost = Annual depreciation Year-4 $60,000.00 Year-5 $55,000.00
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