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Homework 12 Solution 2010 (2)

# Homework 12 Solution 2010 (2) - Determine the NPV and IRR...

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Maximum Score Step 1 200 Step 2 300 Step 3 500 Sensitivities 1000 Total 2000 Determine the NPV and IRR of the investment outlined in the "Given I requested, then copy your worksheet from Step 1 to Step 2 and then worked as you choose, but Index Cells are recommended

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Corrected Information". Work the solution in Steps as Step 2 to Step 3 etc. The sensitivities can we
Oxygen Delignification Example Annual Tons 650,000 Current Sequence DoEo+pD Current Cost per Ton \$34.75 in Year 0 Proposed Sequence ODoEo+pD Proposed Cost per Ton \$26.00 in Year 0 Initial Capital Cost \$25,000,000 Spending Schedule 50% in Year -1 Future Maintenance Capital 2% of original investment Project Life 10 years Terminal Value 5 x Year 10 EBITDA Tax 35% (negative tax okay) Discount Rate 12%

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Starting in Year 1 1.00% 1.00% 1.50% 0.50% 1.50% t 1.00% Improvement (% per Year) Inflation (% per Year)
Step 1 - Depreciation and Capital Investment 200 Points Year Capital Investment Annual Depreciation -1 \$12,500,000 0 \$12,500,000 \$3,572,500 1 \$505,000 \$6,194,665 2 \$510,050 \$4,569,061 3 \$515,151 \$3,409,351 4 \$520,302 \$2,585,294 5 \$525,505 \$2,631,418 6 \$530,760 \$2,682,978 7 \$536,068 \$1,615,080 8 \$541,428 \$527,603 9 \$546,843 \$532,879 10 \$552,311 \$538,208 Check \$30,283,417 Total Investment = \$30,283,417 Check

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Project Year -1 0 1 Asset Value preciation Factors -> 14.29% 24.49% \$21,427,500 \$3,572,500 \$6,122,500 \$15,737,836 \$72,165 \$11,678,825 \$8,784,625 \$6,719,633 \$4,613,720 \$2,461,501 \$1,382,489 \$1,396,314 \$1,410,277 \$1,424,380 \$1,424,380 \$28,859,037 \$3,572,500 \$6,194,665 Asset Value + Total Depreciation \$30,283,417
2 3 4 5 17.49% 12.49% 8.93% 8.92% \$4,372,500 \$3,122,500 \$2,232,500 \$2,230,000 \$123,675 \$88,325 \$63,075 \$45,097 \$72,886 \$124,911 \$89,208 \$63,705 \$73,615 \$126,160 \$90,100 \$74,351 \$127,422 \$75,095 \$4,569,061 \$3,409,351 \$2,585,294 \$2,631,418

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