PLEASE EXPLAIN and NOT JUST ANSWER

1 Find Required Level of net working capital

2 Find Required investment in NWC

3 Find Net Cash Flows

Inputs Equipment cost Net WC/Sales First year sales (in units) Sales price per unit Variable cost per unit Nonvariable costs $5,000 10.00% 500 $24.00 $17.50 $500 Market value of equipment at Year 4 Tax rate WACC Inflation $250 40.00% 11.00% 3.00% Depreciation and Amortization Schedule Year Years 2 Accum. Dep. Initial Cost 1 3 4 Equipment Depreciation Rate Equipment Depreciation Amount Ending Bk Value 20.0% $1,000 4,000 32.0% $1,600 2,400 19.0% $950 1,450 12.0% $600 850 $4,150 $5,000 Equipment Net Salvage Values, in Year 4 Estimated Market Value in Year 4 Book Value in Year 4 Expected Gain or Loss Taxes paid or tax credit Net cash flow from salvage Projected Net Cash Flows 0 1 2 3 4 Initial Outflow Equipment ($5,000) Operating Cash Flows Units sold Sales price Variable costs 500 $24.00 $17.50 500 $24.72 $18.03 500 $25.46 $18.57 500 $26.23 $19.12 Sales revenue Variable costs Nonvariable operating costs Depreciation (equipment) Oper. income before taxes (EBIT) Taxes on operating income (40%) After-tax operating income Add back depreciation Operating cash flow $12,000.00 $8,750.00 $500.00 $1,000.00 $1,750.00 $700.00 $1,050.00 $1,000.00 $2,050.00 $12,360.00 $9,012.50 $515.00 $1,600.00 $1,232.50 $493.00 $739.50 $1,600.00 $2,339.50 $12,730.80 $9,282.88 $530.45 $950.00 $1,967.48 $786.99 $1,180.49 $950.00 $2,130.49 $13, 112.72 $9,561.36 $546.36 $600.00 $2,405.00 $962.00 $1,443.00 $600.00 $2,043.00 Required level of net working capital Required investment in NWC Terminal Year Cash Flow Net salvage value Net Cash Flows NPV IRR MIRR