PLEASE HELP WORK OUT THE NPV CALCULATIONS

Option 1

Formula used

Rt/(1+i)^t

Where:

T- the time of the cash flow, eg year 1, year 2, etc

i- the discount rate

Rt- the net cash flow

Values

Rt	I	T
SEE BELOW TO FIGURE IT OUT	12% of the cost of capital discount rate	20 years

- Note that at the end of the 20^th year, the loan must be repaid ($12 million)

Current income statement

Revenue		33074
COGS
- Shipping costs	8931
- Direct materials	5963
- Direct labor and other	6726
- Total	21620
Gross profit		11454
Operating expenses
- Selling expenses	2232
- Fixed expenses	2641
- Depreciation	1794
- Total	6667
Earnings before interest and taxes		4787
	Interest expense	838
Earning before tax		3949
	Taxes @ 35%	1382
Net income		2567

Changes that need to be made to the income statement to determine the NPV

- Annual sales increase by 4426000

- Cogs would increase

o Annual shipping costs would increase by 955000

o Material costs and labour costs would increase by 6% (material cost = 6320.78 and labour costs = 7129.56)

- Total assets would increase from 30170000 to 43551000