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A company is undertaking a new project. Applicable data follows. . Project duration is 3 vears Required investment for new equipment is $50,000 Depreciate via 5-year MACRS The machine will be sold for S25,000 (today's dollars) at the end of 3 years .The project will bring additional revenue of $70,000 (today's dollars) per year but will incur additional O&M costs of S51,000 (today's dollars) per year An initial Working Capital investment of $10,000 at year 0 is required Subsequent years will require additional Working Capital at the general inflation rate. Any Working Capital investment will be recovered at the end of the project To purchase the equipment, the company will borrow $30,000 at 15% compounded annually over a 2-year period. You will need to determine the 2 equal annual payments used to pay off the S30,000 . .The company itself will finance the remaining S20.000 . General inflation rate is 8% per year for the project Tax rate is 21% Market interest rate i is 10% Given the information, o Determine the end of vear cash flows for vears 0 through 3 o Compute the Net Present Worth for this 3-year project o Compute the IRR of the project Year 0 Year 1 Year 2 Yeal NPW IRR Income Statement and Cash Flow Statement 0 4 5 6 Income statement tax rate Revenues Expenses O&M Labor Material Overhead Depreciation Debt Interest Taxable income inc me taxes Net income Cash Flow Statement Operating activities Net income Depreciation Investment activities Investment Salvage Gains tax Working capital Financing activities Borrowed funds Principal repayment Net Cash Flow A company is undertaking a new project. Applicable data follows. . Project duration is 3 vears Required investment for new equipment is $50,000 Depreciate via 5-year MACRS The machine will be sold for S25,000 (today's dollars) at the end of 3 years .The project will bring additional revenue of $70,000 (today's dollars) per year but will incur additional O&M costs of S51,000 (today's dollars) per year An initial Working Capital investment of $10,000 at year 0 is required Subsequent years will require additional Working Capital at the general inflation rate. Any Working Capital investment will be recovered at the end of the project To purchase the equipment, the company will borrow $30,000 at 15% compounded annually over a 2-year period. You will need to determine the 2 equal annual payments used to pay off the S30,000 . .The company itself will finance the remaining S20.000 . General inflation rate is 8% per year for the project Tax rate is 21% Market interest rate i is 10% Given the information, o Determine the end of vear cash flows for vears 0 through 3 o Compute the Net Present Worth for this 3-year project o Compute the IRR of the project Year 0 Year 1 Year 2 Yeal NPW IRR Income Statement and Cash Flow Statement 0 4 5 6 Income statement tax rate Revenues Expenses O&M Labor Material Overhead Depreciation Debt Interest Taxable income inc me taxes Net income Cash Flow Statement Operating activities Net income Depreciation Investment activities Investment Salvage Gains tax Working capital Financing activities Borrowed funds Principal repayment Net Cash Flow
