| Assignment | | | Name: | | SID: | | Tutorial Time & Day: | | | Tutor: |
| | | | Signature: |
| Year | | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| Cash flows at the start |
| Machine | | - 18,000,000 |
| Delivery | | - 2,000,000 |
| Installation | | - 160,000 |
| Install tax Deduction | | 48,000 |
| Sell Old Machone | | 700,000 |
| Tax Savings Loss on sale | | 30,000 |
| marketing | | - 900,000 |
| marketing Tax Benefit | | 270,000 |
| Working Capital | | - 600,000 |
| Total cash flows at the start | | (20,612,000.0) |
| Cash flows over life |
| Reduced Sales of Challenger | | | - 2,500,000 | - 2,500,000 | - 2,500,000 | - 2,500,000 | - 2,500,000 | - 2,500,000 | - 2,500,000 | - 2,500,000 | - 2,500,000 | - 2,500,000 |
| Revenue | | | 4,000,000 | 6,000,000 | 6,300,000 | 6,615,000 | 6,945,750 | 6,945,750 | 6,945,750 | 6,945,750 | 6,945,750 | 6,945,750 |
| Electricity | | | - 300,000 | - 300,000 | - 300,000 | - 300,000 | - 320,000 | - 320,000 | - 320,000 | - 320,000 | - 320,000 | - 320,000 |
| Material Costs | | | 104,000 | 104,000 | 104,000 | 104,000 | 104,000 | 104,000 | 104,000 | 104,000 | 104,000 | 104,000 |
| Old Depreciation | | | 200,000 | 200,000 | 200,000 | 200,000 |
| New Depreciation | | | - 2,000,000 | - 2,000,000 | - 2,000,000 | - 2,000,000 | - 2,000,000 | - 2,000,000 | - 2,000,000 | - 2,000,000 | - 2,000,000 | - 2,000,000 |
| marketing | | | - 900,000 | - 900,000 | - 900,000 | - 500,000 | - 500,000 | - 500,000 | - 500,000 | - 500,000 | - 500,000 |
| Tax | | | 418,800 | - 181,200 | - 271,200 | - 485,700 | - 518,925 | - 518,925 | - 518,925 | - 518,925 | - 518,925 | - 668,925 |
| Sum | | | - 977,200 | 422,800 | 632,800 | 1,133,300 | 1,210,825 | 1,210,825 | 1,210,825 | 1,210,825 | 1,210,825 | 1,560,825 |
| add back depreciation | | | 1,800,000 | 1,800,000 | 1,800,000 | 1,800,000 | 2,000,000 | 2,000,000 | 2,000,000 | 2,000,000 | 2,000,000 | 2,000,000 | | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 | - 0 |
| Working Capital | 0 | 600,000.00 | 900,000.00 | 945,000.00 | 992,250.00 | 1,041,862.50 | 1,041,862.50 | 1,041,862.50 | 1,041,862.50 | 1,041,862.50 | 1,041,862.50 |
| Change | | 600,000.00 | (300,000.00) | (45,000.00) | (47,250.00) | (49,612.50) | - 0 | - 0 | - 0 | - 0 | - 0 |
| Total cash flows over the life | | | 522,800 | 2,177,800 | 2,385,550 | 2,883,688 | 3,210,825 | 3,210,825 | 3,210,825 | 3,210,825 | 3,210,825 | 3,560,825 |
| Cash flows at the end |
| Salvage Value | | | | | | | | | | | | 6,000,000 |
| Tax Benefit | | | | | | | | | | | | - 1,800,000 |
| Working Capital At end | | | | | | | | | | | | 1,041,863 |
| Total cash flows at end of project | | | | | | | | | | | | 5,241,863 |
| | | | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| Summary and NPV calculations |
| Cash flows |
| At start | | (20,612,000.0) |
| Over the life | | | 522,800.0 | 2,177,800.0 | 2,385,550.0 | 2,883,687.5 | 3,210,825.0 | 3,210,825.0 | 3,210,825.0 | 3,210,825.0 | 3,210,825.0 | 3,560,825.0 |
| At the end of the project | | | | | | | | | | | | 5,241,862.5 |
| Total cash flows | | (20,612,000.0) | 522,800.0 | 2,177,800.0 | 2,385,550.0 | 2,883,687.5 | 3,210,825.0 | 3,210,825.0 | 3,210,825.0 | 3,210,825.0 | 3,210,825.0 | 8,802,687.5 |
| Payback | | | -20,089,200.0 | -17,911,400.0 | -15,525,850.0 | -12,642,162.5 | -9,431,337.5 | -6,220,512.5 | -3,009,687.5 | 0.9374 |
| Required rate of return | 10.7% |
| | | (20,612,000.0) | 472,160.76 | 1,776,342.13 | 1,757,322.45 | 1,918,516.06 | 1,929,248.59 | 1,742,378.49 | 1,573,608.94 | 1,421,186.67 | 1,283,528.26 | 3,178,032.94 |
| Total NPV | | | - 3,559,674.7 |
| Accept/Reject Project | | Reject |
| Payback Period | | 7.9374 |
| Internal rate of return | | 7.4% |
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assignment_submission_sheet_solution------_1.xls
