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Quixotic Enterprises is about to embark on another venture. Poncho Sanchos, the faithful financial analyst, once again will examine the viability of this venture after
Quixotic Enterprises is about to embark on another venture. Poncho Sanchos, the faithful financial analyst, once again will examine the viability of this venture after failures.
A number of windmills are to be constructed on the southern frontier to generate electricity. They will cost $ and will last years, at which time they will have an estimated salvage value of $ However, a capital upgrade of $ will be required at the end of five years. An inventory of spare parts working capital amounting to $ will be required during the term of the venture and will be housed in a warehouse that is currently not being used, but which has been used for Quixotics previous ventures. The warehouse could be rented out at $ per year.
This enterprise is expected to generate cash from the sale of electricity of $ a year for years. Cash expenses for each of the years will be $
The companys tax rate is percent, the CCA rate is percent and the cost of capital is percent.
Requirements:
A Calculate the Net Present Value of the Windmill venture by completing the table below: You need a number for every cell in this spreadsheet.
Event Expected Cash Flow Aftertax Cash Flow Present Value
Enter cash receipts as positive numbers, cash payments as negative numbers. Round all your answers to zero decimal places.
Inital Investment
Working Capital
Revenues
Expenses
Opportunity Cost
Capital Upgrade
Salvage
Working Capital Revcovery
CCA Tax Shield NA NA
N
Net present value NA NA
B It's not worth any marks, but it helps with the marking: what number did you use for Cpv Spv
Enter your answer as a positive number.
C Should Quixotic dream the impossible dream and invest in the Windmill venture?
No
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