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You have been asked to analyze an option to invest in a chemical plant design. The capital investment in the project, excluding working capital, is
You have been asked to analyze an option to invest in a chemical plant design. The capital investment in the project, excluding working capital, is $175 million with a total depreciable capital of $125 million. The investment is to be spread out over three years with the first year being counted as year zero for the purposes of discounting cash flows. The 10 -year plant life is considered with MACRS depreciation schedule (given below). The plant begins operating at the beginning of year 3 but the revenue for this year is booked at the beginning of year 4 and the income for each subsequent year similarly. The sales are $90 million a year in steady state with the first year of operation generating 2/3 the sales but the same operating costs of $20 million a year, all dollars being expressed at the start of the project so inflation applies to the sales and costs. Inflation is to be considered at 6% annually starting in year 2 . Consider the following discounted cash flow analysis of the above investment problem with entries 1-8 that are missing, the table reflects an internal rate of return of 20% and a tax rate of 26%. Fill out the following Table with the values of the eight entries round the values to two decimal places. \begin{tabular}{|l|l|} \hline Entry & Value \\ \hline 1 & \\ \hline 2 & \\ \hline 3 & \\ \hline 4 & \\ \hline 5 & \\ \hline 6 & \\ \hline 7 & \\ \hline 8 & \\ \hline \end{tabular} You have been asked to analyze an option to invest in a chemical plant design. The capital investment in the project, excluding working capital, is $175 million with a total depreciable capital of $125 million. The investment is to be spread out over three years with the first year being counted as year zero for the purposes of discounting cash flows. The 10 -year plant life is considered with MACRS depreciation schedule (given below). The plant begins operating at the beginning of year 3 but the revenue for this year is booked at the beginning of year 4 and the income for each subsequent year similarly. The sales are $90 million a year in steady state with the first year of operation generating 2/3 the sales but the same operating costs of $20 million a year, all dollars being expressed at the start of the project so inflation applies to the sales and costs. Inflation is to be considered at 6% annually starting in year 2 . Consider the following discounted cash flow analysis of the above investment problem with entries 1-8 that are missing, the table reflects an internal rate of return of 20% and a tax rate of 26%. Fill out the following Table with the values of the eight entries round the values to two decimal places. \begin{tabular}{|l|l|} \hline Entry & Value \\ \hline 1 & \\ \hline 2 & \\ \hline 3 & \\ \hline 4 & \\ \hline 5 & \\ \hline 6 & \\ \hline 7 & \\ \hline 8 & \\ \hline \end{tabular}
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