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Major_Project_Draft.xlsx.xlsx - Automation Project...

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Automation ProjectPage 1Fosbeck's Automation ProjectSolution LegendValue given in problemGivenFormula/Calculation/Analysis requiredInvestment cost (today)($400.00)Assumptions, Qualitative analysis or Short answer requiredSalvage Value percentage25%Goal Seek, Scenario or Data Table cellProject life5MACRS ScheduleCrystal Ball InputAnnual labor costs savings$50.00year 133%Crystal Ball OutputAnnual waste disposal cost savings$10.00year 245%Annual Byproduct sales$80.00year 315%Required rate of return12%year 47%Tax rate21%SolutionBasic Analysis (All numbers in $ Mil)YearCash flow estimation012345Investment($400.00)Annual labor costs savings$50.00$50.00$50.00$50.00$50.00Annual waste disposal cost savings$10.00$10.00$10.00$10.00$10.00Annual Byproduct sales$80.00$80.00$80.00$80.00$80.00EBITDA$140.00$140.00$140.00$140.00$140.00Less:Depreciation($132.00)($180.00)($60.00)($28.00)$0.00Additional EBIT (including salvage value)$8.00($40.00)$80.00$112.00$140.00Less:Taxes($1.68)$8.40($16.80)($23.52)($29.40)NOPAT$6.32($31.60)$63.20$88.48$110.60Plus:Depreciation$132.00$180.00$60.00$28.00$0.00FCF($400.00)$138.32###$123.20###$110.60NPV$66.28IRR18.83%AnalysisThis project should be accepted given that project has positive NPV $66.28 and the IRR 18.83% is greater than the required rate of return.Scenario AnalysisSales and NPV numbers are in $ MilScenarioprobabilityByproduct Sales NPVIRRBase40%$80.00 $35.2015.85%Byproduct sales decrease by 10%30%$72.00 $17.3213.92%Byproduct sales decrease by 30%20%$56.00 $(18.44)9.91%Byproduct sales decrease by 50%10%$40.00 $(54.20)5.68%Expected NPV$10.17BreakevenBreakeven byproduct sales13.07%
CoGS ratio15%growth50%SGA$2.00CapEx$2.00Revenue1$10.00Project Life10 yearsTax rate21%R&D$0.60probability of approval10%probability of obsolescence5%WACC12%Year2022202320242025Probability of Success0.10.95Revenue$1.00$1.50Cost($0.15)($0.23)SGA($2.00)($2.00)R&D($0.60)Depreciation (unconditional)$0.02$0.02EBIT($0.60)($1.13)($0.67)Taxes$0.13$0.24$0.14Net Income($0.47)($0.89)($0.53)OCF($0.47)$0.00($0.89)($0.53)CapEx$0.20FCF($0.47)$0.20($0.87)($0.51)NPV$0.62IRR19.38%Real Option ModificationDepreciation

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Term
Spring
Professor
N/A
Tags
SGA, NPVs, Years in the future, 2020s

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