PrintMax is a midcap printer manufacturer located in Austin, Texas. The company president is Sheldon Smith. Sheldon started the company in 1990. The company's original focus was the manufacturer of specialized color laser printers for high volume, high quality printing. Over the years, the company became a reliable manufacture of printers that tended to satisfy midsize publishers and the like. As a recent UT graduate, you were hired by the company's finance department to assist in the valuation of various projects under consideration for investment by the company. One of the major revenue-producing items manufactured by PrintMax is a 3D printer. PrintMax currently has one 3D printer model on the market, and sales have been excellent. The 3D printer is unique in that it serves a budget conscious market despite the typical cost associated with such a product. However, 3D printers have been on the market for some time now and the technology and overall price points are improving rapidly, and the current 3D printer has limited features in comparison with newer models in its price point. PrintMax spent $800,000 to develop a prototype for a new 3D printer that has all the features of the existing 3D printer but adds new features such as a laser cutter. The company has spent an additional $250,000 for a marketing study to estimate the expected sales figures for the new printer. PrintMax can manufacture the new printers for $225 each in variable costs. Fixed costs for the operation are estimated to run $6.38 million per year. The estimated sales volume is 158,000, 166,000, 124,000, 96,000, and 74,000 per year for the next five years, respectively. The unit price of the new printer will be $539. The necessary manufacturing equipment can be purchased for $42.5 million. Depreciation will occur on a seven-year MACRS schedule. The value of the equipment in five years is estimated to be $6.2 million. As Previously stated, PrintMax currently manufactures a 3D printer. Production of the existing model is expected to be terminated in two years. If PrintMax does not introduce the new 3D printer, sales will be 96,000 units and 64,000 units for the next two years, respectively. The price of the existing 3D printer is $389 per unit, with variable costs of $150 each and fixed costs of $4.3 million per year. If PrintMax does introduce the new 3D printer, sales of the existing 3D printer will fall by 28,000 units per year, and the price of the existing units will have to be lowered to $220 each. Net working capital for the 3D printers will be 20% of sales and will occur with the timing of the cash flows for the year; for example, there is no initial outlay for NWC, but changes in NWC will first occur in Year 1 with the first year's sales. PrintMax has a 21% corporate tax rate and a required return of 12%. Sheldon has asked You to prepare a report that answers the following questions: 1. What is the payback period of the project? 2. What is the profitability index of the project? 3. What is the IRR of the project? 4. What is the NPV of the project? A B C D E F G H J PrintMax 1 Instructions Input the various requested values, which can be found in the case description posted on Canvas. This page is organized to assist your efforts and will be referenced to calculate the output values found on the next worksheet. Each cell shaded in blue requires entry. sunk cost sunk cost Year 1 Year 2 Year 3 Year 4 Year 5 2 New 3D Printer Project Analysis 3 Input Data 4 5 Equipment 6 Salvage value 7 R&D 8 Marketing study 9 10 11 Sales(units) 12 Depreciation rate 13 Sales of old printer 14 Lost sales 15 16 Price of new printer 17 VC 18 FC 19 Price of old printer 20 Revised price of old printer 22 VC of old printer 23 Tax rate 24 NWC percentage 25 Required return 26 21 B C D E F G H I J PrintMax Instructions This sheet requires you to reference and use formulas to solve each cell. No raw input data should be typed on this page; that is, only cell references and formulas. The only exception is values for zeros where appropriate. Do not leave a cell value blank (null). Each cell shaded in blue requires entry. Year 2 Year 3 Year24 Years Year 5 0 0 0 0 0 0 0 0 $0 0 $0 $0 0 $0 $0 0 $0 $0 0 $0 $0 0 0 0 0 U $0 0 $0 0 $0 0 0 0 $0 0 $0 0 $0 0 0 0 $0 0 $0 0 $0 0 0 0 $0 0 $0 0 1 2 New 3D Printer Project Analysis 3 Valuation Calculations and Results 4 5 6 6 Old printer price reduction 7 8 Sales Year 1 9 New 10 Lost sales 0 11 Lost rev. 0 12 Net sales 13 14 vc 15 New $0 16 Lost sales 0 17 Net 1 $0 18 19 13 20 Sales $0 21 VC 0 22 Fixed costs 0 0 23 Dep 0 24 EBT $0 25 Tax 0 26 NI $0 27 +Dep 0 28 OCF 29 30 NWC 31 Beg $0 32 End 0 33 NWC CF $0 34 35 Net CF 36 37 Salvage 38 BV of equipment $ 39 Taxes 40 Salvage CF $ 41 42 Net CF Time 43 0 44 1 45 2 - 46 3 47 4 48 5 49 50 Valuation Method 51 Payback period 52 PI 53 IRR 54 NPV 55 $0 $0 0 $0 $0 0 $0 $0 0 $0 . $0 Net CF Value