Question
Projected Net Cash Flows Estimation Statement 0 Years 1 Years 2 Years 3 Years 4 Years 2015 2016 2017 2018 2019 Investment Outlays Buildings $
Projected Net Cash Flows Estimation Statement
0 Years 1 Years 2 Years 3 Years 4 Years
2015 2016 2017 2018 2019
Investment Outlays
Buildings $ 12,000
Equipment $ 8,000
Operating Cash Flow Over the Project's Life
Unit Sold $20,000 $20,000 $20,000 $20,000
Sales Price $ 3.00 $ 3.06 $ 3.12 $ 3.18
Sales Revenue $ 60,000 $ 61,200 $ 62,424 $ 63, 672
Variable Costs $ 42,000 $ 42,840 $ 43, 697 $ 44,571
Fixed Operating Costs $ 8000 $ 8080 $ 8161 $ 8242
Depreciation (building) $ 156 $ 312 $ 312 $ 312
Depreciation (equipment) $1600 $2560 $1520 $960
Operating Income before taxes (EBIT) $8244 $7408 $8734 $9587
Taxes on operating income (40%) $3298 $2963 $3949 $3835
Net Operating profit after taxes (NOPAT) $4946 $4445 $5241 $5752
Add back depreciation $1756 $2,872 $1,832 $1,272
Operating cash flow $ 6,702 $ 7,317 $ 7,073 $ 7,024
Cash Flows Due to Net Operating Working Capital
Net Operating Working Capital (based on sales) $ 6,000 $ 6,120 $ 6,242 $ 6,367 $0
Cash Flows due to investment in NOWC ($6,000) ($120) ($122) ($125) $6367
Salvage Cash Flows: Long Term Asset
Net Salvage Cash Flows: Building $ 8,863
Net Salvage cash flow: Equipment $ 1,744
Total Salvage cash flows $ 10,607
Net Cash Flow (Time Line of cash flows) ($26,000) $6,582 $ 7,194 $ 6,948 $ 23,999
1.Estimate the incremental cash flows to be received from this project.
2.Using the incremental cash flows, compute the following and the state in each case whether the company should go head with the project.
a.Payback
b.NPV
C.IRR
d.Profitability Index
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