Project termination cash flows salvage value taxed as

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Unformatted text preview: Add back depreciation EBIT(1-T) + DEP III. Project Termination Cash Flows Salvage value (taxed as ordinary income) Tax on salvage value After-tax salvage value ∆NOWC = Recovery of NOWC ProjectFCF=EBIT(1-T)+DEP-CAPEX-∆NOWC IV. Results NPV = IRR = MIRR = Payback = 0 1 2 3 4 100 100 $2.00 $2.00 $200.00 $200.00 $120.00 $120.00 $79.20 $108.00 $199.20 $228.00 $0.80 $-28.00 0.3 $-11.20 $0.50 $-16.80 79.20 $108.00 $79.70 $91.20 $-260.00 $79.70 $91.20 0 Depr. Rate Tax rate WACC 1 2 33% 40% 10% 3 45% 15% 4 7% 100 100 $2.00 $2.00 $200.00 $200.00 $120.00 $120.00 36.0 16.8 $156.00 $136.80 $44.00 $63.20 $17.60 25.3 $26.40 $37.90 36.00 $16.80 $62.40 $54.70 $62.40 4 # ## $25.00 $10.00 $15.00 $20.00 $89.70 $-4.03 9.28% 9.57% 3.26 Worst Case I. Investment Outlays Equipment cost Installation CAPEX Increase in inventory Increase in accounts payable ∆NOWC II. Project Operating Cash Flows Unit sales (thousands) Price/unit Total revenues Operating costs excluding depreciation Depreciation Total cost EBIT (or operating income) Taxes on operating income EBIT(1-T) = After-tax operating income Add back dep...
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