Year
1
2
3
4
Contract
47,500,000
47,500,000 47,500,000 47,500,000
Spot
10,800,000
16,200,000
20,700,000
8,100,000
Total
58,300,000
63,700,000 68,200,000 55,600,000
Initial NWC
2915000
CF today is:
Equipment
-85,000,000.00
Land
-7,000,000.00
NWC
-2,915,000.00
Total
-94,915,000.00
OCF
Year 1
2
3
4
5
6
Sales
58,300,000
63,700,000
68,200,000 55,600,000
Less:
Variable Cost
19,220,000
21,080,000
22,630,000 18,290,000
Less:
Fixed Cost
4,300,000
4,300,000
4,300,000
4,300,000
2,800,000
7,500,000
Less:
Depreciation
12,155,000
20,825,000
14,875,000 10,625,000
EBIT
22,625,000
17,495,000
26,395,000 22,385,000
-2,800,000
-7,500,000
Tax @ 38%
8,597,500
6,648,100
10,030,100
8,506,300
-1,064,000
-2,850,000
Net Income
14,027,500
10,846,900
16,364,900 13,878,700
-1,736,000
-4,650,000
Add:
Depreciation
12,155,000
20,825,000
14,875,000 10,625,000
OCF
26,182,500
31,671,900
31,239,900 24,503,700
-1,736,000
-4,650,000
Year
1
2
3
4
Beginning
WC
2,915,000
3,185,000
3,410,000
2,780,000
Ending WC
3,185,000
3,410,000
2,780,000
0
NWC CF
-270,000
-225,000
630,000
2,780,000
Book Value of Equipment= 85,000,000 - 12,155,000 - 20,825,000 - 14,875,000 - 10,625,000
Book Value of Equipment= 26,520,000
Market Value of Equipment is 51,000,000
Taxes on sale of equipment= (51,000,000 - 26,520,000) (.38) = 9,302,400
After-tax salvage value= 51,000,000 - 9,302,400
After-tax salvage value= 41,967,600
Present Value of Future Cash Flows= 23,139,416 + 25,063,179 + 22,691,369 + 43,865,747
(984,312)
(2,357,550)=
Present Value of Future Cash Flows= 111,417,849
Profitability Index= Present Value of Future Cash Flows of 111,417,849/ Initial Capital Outlay
of 94,915,000
Profitability Index=1.17
Net Cash Flow
Year 0
1
2
3
4
5
6
Capital
Spending
-85,000,000
0
0
0
41,697,600
0
0
Opportunity
-7,000,000
Cost
NWC
-2,915,000
-270,000
-225,000
630,000
2,780,000
OCF
26,182,000
31,671,900 31,239,900 24,503,700
-1,736,000
-4,650,000
Total Project
CF
-94,915,000
25,912,000
31,446,900 31,869,900 68,971,300
-1,736,000
-4,650,000
Net Present Value
Year 0
1
2
3
4
5
6
OCF
-94,915,000
25,912,000
31,446,900 31,869,900 68,971,300
-1,736,000
-4,650,000
PV Factor
12%
1
0.893
0.797
0.712
0.636
0.567
0.507
PV
-94,915,000
23,139,416
25,063,179 22,691,369 43,865,747
-984,312
-2,357,550
NPV
