Table $1-$ Data

Cost of the new manfactoring equipment $($at year$=0)$ $ $191\mathrm{.}1$ million

Corporate income tax rate $-$ Federal $26\mathrm{.}0\%$

Corporate income tax rate $-$ State of Maryland $8\mathrm{.}0\%$

Discount rate for the project $5\mathrm{.}98\%$

Table $2-$ After$-$tax Cash Flow Timeline

$($all figures in $ millions$)$

Year Projected Cash Inflows from Operations Projected Cash Outflows from Operations Depreciation Expense Projected Taxable Income Projected Federal Income Taxes Projected State Income Taxes Projected After$-$tax Cash Flows

$0$

$1850\mathrm{.}0840\mathrm{.}0$ $$23\mathrm{.}9(13\mathrm{.}9)(3\mathrm{.}6)(1\mathrm{.}1)14\mathrm{.}738\mathrm{.}62$

$2900\mathrm{.}0810\mathrm{.}0$ $$23\mathrm{.}966\mathrm{.}117\mathrm{.}25\mathrm{.}367\mathrm{.}591\mathrm{.}42$

$3990\mathrm{.}0870\mathrm{.}0$ $$23\mathrm{.}996\mathrm{.}125\mathrm{.}07\mathrm{.}787\mathrm{.}3111\mathrm{.}22$

$41,005\mathrm{.}0900\mathrm{.}0$ $$23\mathrm{.}981\mathrm{.}121\mathrm{.}16\mathrm{.}577\mathrm{.}4101\mathrm{.}32$

$51,200\mathrm{.}01,100\mathrm{.}0$ $$23\mathrm{.}976\mathrm{.}119\mathrm{.}86\mathrm{.}174\mathrm{.}198\mathrm{.}02$

$61,300\mathrm{.}01,150\mathrm{.}0$ $$23\mathrm{.}9126\mathrm{.}132\mathrm{.}810\mathrm{.}1107\mathrm{.}1131\mathrm{.}02$

$71,350\mathrm{.}01,300\mathrm{.}0$ $$23\mathrm{.}926\mathrm{.}16\mathrm{.}82\mathrm{.}141\mathrm{.}165\mathrm{.}02$

$81,320\mathrm{.}01,300\mathrm{.}0$ $$23\mathrm{.}9(3\mathrm{.}9)(1\mathrm{.}0)(0\mathrm{.}3)21\mathrm{.}345\mathrm{.}22$

Table $3-$ Example $-$ Computing Projected After$-$tax Cash Flows

For Year $4($all figures in $ millions$)$

Projected Cash Inflows from Operations $1005\mathrm{.}0$ Projected Cash Inflows from Operations $1005\mathrm{.}0$

minus Projected Cash Outflows from Operations $(900\mathrm{.}0)$ minus Projected Cash Outflows from Operations $(900\mathrm{.}0)$

minus Depreciation Expense $(23\mathrm{.}9)$ minus Projected Federal Income Taxes $(21\mathrm{.}1)$

equals Projected Taxable Income $81\mathrm{.}1$ equals Projected State Income Taxes $(6\mathrm{.}5)$

Projected After$-$tax Cash Flows $77\mathrm{.}4$

Projected Taxable Income $81\mathrm{.}1$

times Corporate income tax rate $-$ Federal $26\mathrm{.}0\%$

equals Projected Federal Income Taxes $21\mathrm{.}1$

Projected Taxable Income $81\mathrm{.}1$

times Corporate income tax rate $-$ State $8\mathrm{.}0\%$

equals Projected State Income Taxes $6\mathrm{.}5$

$1.$ Complete Table $2.$ Compute the projected after tax cash flows for each of years $1-8.$

Year Projected After$-$tax Cash Flows Plus Depriciation Expense

$0$

$114\mathrm{.}738\mathrm{.}6$

$267\mathrm{.}591\mathrm{.}4$

$387\mathrm{.}3111\mathrm{.}2$

$477\mathrm{.}4101\mathrm{.}3$

$574\mathrm{.}198\mathrm{.}0$

$6107\mathrm{.}1131\mathrm{.}0$

$741\mathrm{.}165\mathrm{.}0$

$821\mathrm{.}345\mathrm{.}2$

$2.$ Compute the total present value $($PV$)$ of the projected after tax cash flows for years $1-8.$

$5\mathrm{.}98\%$

Year Present Value $($PV$)$

$0$

$136\mathrm{.}4$

$2167\mathrm{.}7$

$3297\mathrm{.}4$

$4351\mathrm{.}3$

$5413\mathrm{.}1$

$6644\mathrm{.}7$

$7363\mathrm{.}2$

$8281\mathrm{.}0$

TOTAL $2,554\mathrm{.}9$

$3.$ Compute the net present value $($NPV$)$ of the projected after tax cash flows for years $0-8.$

Year Net Present Value $($NPV$)$

$0$

$1$ $$36\mathrm{.}4$

$2$ $$81\mathrm{.}4$

$3$ $$93\mathrm{.}4$

$4$ $$80\mathrm{.}3$

$5$ $$73\mathrm{.}3$

$6$ $$92\mathrm{.}5$

$7$ $$43\mathrm{.}3$

$8$ $$28\mathrm{.}4$

TOTAL $$529\mathrm{.}1$

$4.$ Compute the internal rate of return $($IRR$)$ of the project.

$5.$ The CFO believes that it is possible that the next few years will bring a very low interest rate environment.

Therefore, she has asked that you repeat the NPV calculation in question $3$ showing the case where the

discount rate for the project is $5\mathrm{.}02\%$

Year Net Present Value $($NPV$)$

$0$

$1$ $$36\mathrm{.}8$

$2$ $$82\mathrm{.}9$

$3$ $$96\mathrm{.}0$

$4$ $$83\mathrm{.}3$

$5$ $$76\mathrm{.}7$

$6$ $$97\mathrm{.}7$

$7$ $$46\mathrm{.}1$

$8$ $$30\mathrm{.}6$

TOTAL $$550\mathrm{.}1$ NEED HELP WITH QUESTION $4$