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Homework 11 Solution 2010

Homework 11 Solution 2010 - Determine the NPV and IRR of...

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Maximum Score Step 1 200 Step 2 200 Step 3 200 Sensitivities 400 Total 1000 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
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Oxygen Delignification Example Annual Tons 650,000 Current Sequence DoEo+pD Current Cost per Ton $34.75 Proposed Sequence ODoEo+pD Proposed Cost per Ton $26.00 Annual Savings $3,791,667 without depreciation Initial Capital Cost $25,000,000 Spending Schedule 0% 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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Savings per Ton $5.83
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Step 1 - Depreciation and Capital Investment 200 Points Year Capital Investment Annual Depreciation -1 $- $- 0 $25,000,000 $3,572,500 1 $500,000 $6,193,950 2 $500,000 $4,566,400 3 $500,000 $3,403,850 4 $500,000 $2,576,300 5 $500,000 $2,618,450 6 $500,000 $2,665,550 7 $500,000 $1,592,700 8 $500,000 $500,000 9 $500,000 $500,000 10 $500,000 $500,000 Check $30,000,000 $28,689,700 Tons per Year Base Case Annual Cost Proposed Case Annual Cost Bleaching Cost
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Bleaching Cos Fre Free Cas
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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 $15,733,550 $71,450 $11,667,150 $8,763,300 $6,687,000 $4,568,550 $2,403,000 $1,310,300 $1,310,300 $1,310,300 $1,310,300 $1,310,300 Depreciation $3,572,500 $6,193,950 -1 0 1 650,000 650,000 $22,587,500 $22,587,500 $16,900,000 $16,900,000 t Savings, $ per Year $5,687,500 $5,687,500
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st Savings, $ per Ton $8.75 $8.75 Incremental EBIT $2,115,000 $(506,450) Incremental EBITDA $5,687,500 $5,687,500 Tax at 35% $740,250
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