• Using the required rate of return the project given. To evaluate, set up the cash flow estimation in the excel spreadsheet posted. Your company has raised $5,000,000 to invest in an expansion project. All 4 projects will have to begin at the same time, so evaluate the costs of the projects to check for mutually exclusiveness of the projects. Depending on the costs and returns, it is possible to invest in multiple projects. Each project will have its pros and cons, and each project to choose from will have percentages of costs and returns for Expected and Bad Economies. You will need the cash flows for each economy and do a weighted average. Set up excel using formulas.
• 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 this image: MACRS Table Download MACRS Table) 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%.
• 

20-year Table A-1. 3-, 5-,7-, 10-, 15-, and 20-Year Property Half-Year Convention Depreciation rate for recovery period Year 3-year 5-year 7-year 10-year 15-year 1 33.33% 20.00% 14.29% 10.00% 5.00% 2 44.45 32.00 24.49 18.00 9.50 3 14.81 19.20 17.49 14.40 8.55 4 7.41 11.52 12.49 11.52 7.70 5 11.52 8.93 9.22 6.93 3.750% 7.219 6.677 6.177 5.713 5.76 6 7 8 9 10 8.92 8.93 4.46 7.37 6.55 6.55 6.56 6.55 6.23 5.90 5.90 5.91 5.90 5.285 4.888 4.522 4.462 4.461 3.28 11 12 13 5.91 5.90 5.91 5.90 5.91 4.462 4.461 4.462 4.461 4.462 14 15 2.95 16 17 18 19 20 4.461 4.462 4.461 4.462 4.461 21 2.231 | 0 MBIE Best desde Lalu VE 20-year Table A-1. 3-, 5-,7-, 10-, 15-, and 20-Year Property Half-Year Convention Depreciation rate for recovery period Year 3-year 5-year 7-year 10-year 15-year 1 33.33% 20.00% 14.29% 10.00% 5.00% 2 44.45 32.00 24.49 18.00 9.50 3 14.81 19.20 17.49 14.40 8.55 4 7.41 11.52 12.49 11.52 7.70 5 11.52 8.93 9.22 6.93 3.750% 7.219 6.677 6.177 5.713 5.76 6 7 8 9 10 8.92 8.93 4.46 7.37 6.55 6.55 6.56 6.55 6.23 5.90 5.90 5.91 5.90 5.285 4.888 4.522 4.462 4.461 3.28 11 12 13 5.91 5.90 5.91 5.90 5.91 4.462 4.461 4.462 4.461 4.462 14 15 2.95 16 17 18 19 20 4.461 4.462 4.461 4.462 4.461 21 2.231 | 0 MBIE Best desde Lalu VE