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BaM-Ch13 - Chapter 13 Ch 13-11 Build a Model Webmasters.com...

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Page 1 Chapter 13. Ch 13-11 Build a Model a. Develop a spreadsheet model and use it to find the project’s NPV, IRR, and payback. Key Output: NPV = Part 1. Input Data (in thousands of dollars) IRR = MIRR = Equipment cost $10,000 Net Operating WC/sales 10% Market value of equipment at Year 4 $500 First year sales (in units) 1,000 Tax rate 40% Sales price per unit $24.00 WACC 10% Variable cost per unit $17.50 Inflation 3.0% Non-variable costs $1,000 Part 2. Depreciation and Amortization Schedule Years Accum'd Year Initial Cost 1 2 3 4 Depr'n Equipment Depr'n Rate 20.0% 32.0% 19.0% 12.0% Equipment Depr'n, Dollars Ending Bk Val: Cost - Accum Dep'rn Part 3. Net Salvage Values, in Year 4 Equipment Estimated Market Value in Year 4 Book Value in Year 4 Expected Gain or Loss Taxes paid or tax credit Net cash flow from salvage Part 4. Projected Net Cash Flows (Time line of annual cash flows) Years 0 1 2 3 4 Investment Outlays at Time Zero: Equipment Operating Cash Flows over the Project's Life: Units sold Sales price Variable costs Sales revenue Variable costs Non-variable operating costs Depreciation (equipment) Oper. income before taxes (EBIT) Taxes on operating income (40%) Net Operating Profit After Taxes (NOPAT) Add back depreciation Operating cash flow Terminal Year Cash Flows: Required level of net operating working capital Required investment in NOWC Terminal Year Cash Flows: Net salvage value
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