This project is over the course of 5 years. You will need an investment of $2.5 million in Year 0, $1.75 million for equipment, and
This project is over the course of 5 years. You will need an investment of $2.5 million in Year 0, $1.75 million for equipment, and $750,000 for inventory for year 1. Depreciation is accelerated based on IRS tables (found on page 440/441 in your textbook) for special manufacturing tools, and the salvage value will be $100,000. Total inventory produced will be 15,000 units, and sales are expected to be 3,000 units per year and the final year will be the remainder of the inventory. Prices are expected to start at $700, and decrease by 15% from the prior year each year as the product ages. There is a 40% chance the Economy worsens by the end of Year 2, then sales are estimated to be 30% less then the prior year each year, prices are expected to decrease at a faster rate of 40% less than the prior year each year and inventory to be liquidated will be at a loss of 50% due to becoming obsolete. The fixed cost is $200,000 per year and the variable cost is 35% of revenue. The estimated tax rate is 40%.
Can you guys check my answers and I don't understand how to figure out the other parts of the problem. I screen shot my excel sheet
AutoSave Off H D G Project Excel Sheet Search Sign in - 0 X DrawPage Layout Formulas Data Review View Help Share Comments File M 11 P E EX 2 Home Insert & Cut [Copy 3 Format Painter Clipboard Calibri BI U - 9 Font A A A === 27v 3 3 alle Wrap Text Merge & Center - Paste Insert Delete Format Ideas $ ~ % 20 AutoSum - Fill Sort & Clear Filter Editing Conditional Format as Cell Formatting Table Styles Find & Select Alignment Number Styles Cells Ideas H19 A / B C D E F G H I J K L M N Net Income $100,000.00 Salvage Value Taxes on salvage value of equipment Cash flow from sale of equipment Project free cash flows Depreciation Cost Year 3 4 5 Rate Depreciation per year Predicted Cash Flow Odds 0 1 Cash Flow Scenario Good Economy Bad Economy Weighted average cash flow Project Evaluation Good Economy IRR Bad Economy IRR WACC NPV Blended IRR MIRR Payback Project 1 Project 2 Project 3 Project 4 + Ready Project Excel Sheet Search Sign in - 0 x Comments Share AutoSave CH HUSS File Home Insert Draw Page Layout X Out Calibri 11 Paste Copy Format Painter BI S Cipboard Font Formulas AA A Data Review === View Help Wrap Text Merge Center AutoSum 4 0 Insert Delete Format Ideas Sy% . Number Conditional Formatas Cell Formatting Table Styles Styles Clear Sort & Filter Edung Find & Select Alignment Cels L Bad Economy M N O P 01 Good Economy Years $750.000.00 Price of liquidated inventory Liquidated 3,000 $700.00 $2,100,000.00 3,000 $595.00 $1,785,000.00 3,000 $505.75 $1,517,250.00 3,000 S429.64 $1,288,920.00 3,000 $365.20 $1,095,600.00 $735,000.00 $200,000.00 S624.750.00 $200,000.00 S531,037.50 $200,000.00 S451,122.00 $200,000.00 $383,460.00 $200,000.00 $1,900,000.00 $1,160,250.00 $986,212,50 5 837.793.00 $712.140.00 $100,000.00 28 Project 1 Project 2 Project 3 Project 4 + Heady B I - E - 100% AutoSave Off H D G Project Excel Sheet Search Sign in - 0 X DrawPage Layout Formulas Data Review View Help Share Comments File M 11 P E EX 2 Home Insert & Cut [Copy 3 Format Painter Clipboard Calibri BI U - 9 Font A A A === 27v 3 3 alle Wrap Text Merge & Center - Paste Insert Delete Format Ideas $ ~ % 20 AutoSum - Fill Sort & Clear Filter Editing Conditional Format as Cell Formatting Table Styles Find & Select Alignment Number Styles Cells Ideas H19 A / B C D E F G H I J K L M N Net Income $100,000.00 Salvage Value Taxes on salvage value of equipment Cash flow from sale of equipment Project free cash flows Depreciation Cost Year 3 4 5 Rate Depreciation per year Predicted Cash Flow Odds 0 1 Cash Flow Scenario Good Economy Bad Economy Weighted average cash flow Project Evaluation Good Economy IRR Bad Economy IRR WACC NPV Blended IRR MIRR Payback Project 1 Project 2 Project 3 Project 4 + Ready Project Excel Sheet Search Sign in - 0 x Comments Share AutoSave CH HUSS File Home Insert Draw Page Layout X Out Calibri 11 Paste Copy Format Painter BI S Cipboard Font Formulas AA A Data Review === View Help Wrap Text Merge Center AutoSum 4 0 Insert Delete Format Ideas Sy% . Number Conditional Formatas Cell Formatting Table Styles Styles Clear Sort & Filter Edung Find & Select Alignment Cels L Bad Economy M N O P 01 Good Economy Years $750.000.00 Price of liquidated inventory Liquidated 3,000 $700.00 $2,100,000.00 3,000 $595.00 $1,785,000.00 3,000 $505.75 $1,517,250.00 3,000 S429.64 $1,288,920.00 3,000 $365.20 $1,095,600.00 $735,000.00 $200,000.00 S624.750.00 $200,000.00 S531,037.50 $200,000.00 S451,122.00 $200,000.00 $383,460.00 $200,000.00 $1,900,000.00 $1,160,250.00 $986,212,50 5 837.793.00 $712.140.00 $100,000.00 28 Project 1 Project 2 Project 3 Project 4 + Heady B I - E - 100%
