NPV Examples Solved.xlsx - 0 1 2 Sales Operating Costs EBIT(S-C Operating Cash Flows Taxes Paid After tax CF Add Dt 80000 58000 22000 8800 13200 1404.8

NPV Examples Solved.xlsx - 0 1 2 Sales Operating Costs...

This preview shows page 1 - 8 out of 22 pages.

0 1 2 Initial Outlay Building -24000 Equipment -16000 NWC -12000 Sales 80000 80000 Operating Costs 58000 58000 EBIT (S-C) 22000 22000 Taxes Paid 8800 8800 After tax CF 13200 13200 1404.8 2297.6 OCF 14605 15498 Building Equipment Taxable CF Tax Saving Cash Inflow NWC Terminal CF Total CF -52000 14605 15498 NPV $13,977.17 @ 12% Tax-Shield Approach Depreciation 3512 5744 EBIT: Earning before tax and interest Dt pre-tax dep*40% NWC: net working capital Market Vakue Book Value P/L Building 15000 21816 -6816 Operating Cash Flows Add D t Terminal Cash Flows (S-C) *(1- t) + D t
Image of page 1
Building 4000 2720 1280 19000 24536 -5536
Image of page 2
3 4 80000 80000 58000 58000 22000 22000 8800 8800 13200 13200 1465.6 1017.6 wher Dt=pre-tax prep *40% 14666 14218 -6816 1280 -5536 2214.4 19000 15000+4000 its total market value of the building and equip 12000 33214.4 14666 47432 3664 2544
Image of page 3
Image of page 4
Details Existing Intitial Cost 120,000 Current Value 36000 Remaining Life 6 MACRS Class 5 Annual Pre Tax Operating Cash Flow 20,000 57600 Loss on Sale (Current - Book Value) -21600 Tax Savings 8640 Replacement 0 Initial Outlay New -200000 Old 36000 Tax Saving 8640 Operating Cash Flows (65-20000) After Tax (45000*60%) Tax Shield from Depreciation After Tax Cashflows -155360 NPV $5,101.91 IRR 11% PI 1.0328392589 Year MACRS Year Depreciation Old Year Depreciation New Net Depreciation Book Value 120000*0.48
Image of page 5
look at te depre rate of the old macine and the current one Market value Book Value macine 36000 57600 tax saving: Tax-Shield Approach (S-C) *(1- t) + D
Image of page 6
New 200,000 200000 6 5 65,000
Image of page 7
Image of page 8

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture