This Company Limited is a wine manufacturer. In order to open up a new market and obtain greater benefits. New machines for wine will be developed to improve the future production.

The place for researching the new machine will be in a factory that rent is $150,000 per year. After this project, this place will be rented to new users and will be continue to be used.

There is an old machine and its written down value is $0. But there is a other company would like to offer $3,000 to buy it. And the company sold this old machine.

The new machine cost $170,000 and requires installation costs of $70,000. This new machine can be used for 10 years. And over its 10 years life, the new machine can reduce operating costs by $35,000 per year. After the project, this machine still can use for 1 more year, and it will be sold for $30,000.

With the development of the manufacturer, the company needs $5000 of additional stock. Moreover, the initial advertising costs are $10,000, now the existing advertising budget will change from $15,000 to $25,000. With the increase of production, an additional worker is required, the salaries will change from $60,000 to 75,000 per year.

After using the new machine, the revenue is expected to be $200,000 in the first year, and grow by 10% each year for the remainder of the project. Material costs are expected to be 25% of sales in each year.

Cost of capital is 12% and tax rate is 30%.

How to calculate question into the excel ?

Year Asset Purchase Opportunity Cost rent (After Tax) Opportunity Cost machine (After Tax) Initial advertising cost (After Tax) Change in Working Capital (accounts payable, accounts receivable, stock) Sales Material Costs Lost sales Saved costs Advertising Wages Insurance Before Tax cashflow Less tax After Tax Cashflow Add: Depreciation Tax Saving Sale of asset Proceeds Tax on asset sale Total CashFlow Present Value (at your %) NPV Recommnedation : Partner Contribution Name / Student # Name / Student # 100 Year Asset Purchase Opportunity Cost rent (After Tax) Opportunity Cost machine (After Tax) Initial advertising cost (After Tax) Change in Working Capital (accounts payable, accounts receivable, stock) Sales Material Costs Lost sales Saved costs Advertising Wages Insurance Before Tax cashflow Less tax After Tax Cashflow Add: Depreciation Tax Saving Sale of asset Proceeds Tax on asset sale Total CashFlow Present Value (at your %) NPV Recommnedation : Partner Contribution Name / Student # Name / Student # 100