FI515_W5_Project_ - a Price 70,000 Modifications 15,000 NWC...

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a. Price 70,000 Modifications 15,000 NWC Change 4,000 Net Cost 89,000 = $89,000 b. 25,000*0.6=15,000 (After Tax) Year 1 = 85,000*.33=28,050 (Deprecation) Year 2 = 85,000*.45=38,250 (Deprecation) Year 3 = 85,000*.15=12,750 (Deprecation) Year 1 = 28,050*.40=11,220 (Deprecation Shield) Year 2 = 38,250*.40=15,300 (Deprecation Shield) Year 3 = 12,750*.40=5,100 (Deprecation Shield) Year 1 Year 2 Year 3 After Tax 15,000 15,000
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Unformatted text preview: 15,000 (Deprecation Shield) 11,220 15,300 5,100 Net Cash Flow 26,220 30,300 20,100 c. Salvage Tax 30,000-5,950=24,050 24,050*.4=9,620 Salvage Value = 30,000-Salvage tax = 9,620 20,380 + Return on NWC 4,000 End of Project Cash Flow $24,380 d. CF0= - 89,000 CF1 = 26,220 CF3 = 44,480 I/YR = 10 Solved for NPV = - 6,703.83 Since this project has a NPV of -6,702.83 it should not be accepted...
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  • Spring '12
  • Willaims
  • Net Present Value, Generally Accepted Accounting Principles, $89,000, Deprecation Shield, $24,380

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