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need excel format You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers The market for zithers is
need excel format
You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers The market for zithers is growing quickly. The company bought some land three years ago for $2.1 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.3 million on an aftertax basis. In four years, the land could be sold for $2.4 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $125.000. An excerpt of the marketing report is as follows: The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,600, 4,300,5,200, and 3,900 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a premium price of $750 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. PUTZ believes that fixed costs for the project will be $415,000 per year, and variable costs are 15 percent of sales. The equipment necessary for production will cost $3.5 million and will be depreciated according to a three-year MACRS schedule. At the end of the project, the equipment can be scrapped for $350,000. Net working capital of $125,000 will be required immediately. PUTZ has a 22 percent tax rate, and the required return on the project is 13 percent. What is the NPV of the project? Original cost of land Current land value Land value in 4 years Marketing study $ $ $ 2.100.000 2,300,000 2,400,000 125,000 Year 1 3,600 Year 2 4,300 Year 3 5,200 Year 4 3.900 Units sold Sales price Fixed costs Variable costs Equipment costs Pretax salvage value Networking capital Tax rate Required return $ 750 415,000 15% 3,500,000 350,000 125,000 $ 2246 1396 Year 2 Year 1 33 3396 Year 3 14 81% Year 4 7419 MACRS percentages Complete the following analysis. Do not hard code values in your calculations. Enter a "0" for any cost that should not be included. You must use the built-in Excel function to calculate the NPV. Aftertax cash flow Pretax salvage value Taxes Aftertax salvage value Year Year Revenues Fixed costs Variable costs Depreciation EBT Taxes Net income Equipment Land Networking capital OCF Total cash flow NPVStep by Step Solution
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