The tax rate is 40 and the require Calculate the Net Present Value NPV of the

The tax rate is 40 and the require calculate the net

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project the equipment can be sold for $100. The tax rate is 40% and the require Calculate the Net Present Value (NPV) of the project at a wacc of 10%. Calculate the project volatility. Copyright by Domingo Castelo Joaquin 2005, [email protected]
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Historical Cost of Fixed Assets 600 600 Accumulated Depreciation 100 Ending Book Value 600 500 Salvage Value Ending Book Value Capital Gains Capital Gains Tax Salvage Value Captial Gains Tax Net Proceeds from Sale of Fixed Assets Year 0 Year 1 Notation: PV = Present value of remaining cash flows as of the end of year 0. NPV = Net present value. PV1 = Present value of remaining cash flows as of the end of year 1. CF1 = Free cash flow in year 1. LN(PV1+CF1) = Natural logarithm of (PV1+CF1).
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Year 2 Year 3 4% 4% 50% 50% 3,122 3,250 1,561 1,625 65 70 100 100 1,396 1,455 558 582 838 873 100 100 38 (975) (180) 900 2,128 975 - 38 (975) uniformly distributed between rate that is normally distributed al variable costs are expected d in each year is expected to be incremental revenues in the nd growing by $5 each year n plant and equipment. Plant zero value. At the end of the ed return is 10%.
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600 600 200 300 400 300 100 300 (200) (80) 100 -80 180 Year 2 Year 3
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Year 0 Year 1 Sales growth rate Variable Costs as % of Sales 50% Sales #ADDIN? Variable Cost #ADDIN?
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  • Spring '17
  • Depreciation, Generally Accepted Accounting Principles, ADDIN

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