Exhibit 2: Project Cash Flow Data Investment-related cash flow forecasts: Invoice price of the machinery = $500,000 Shipping charges = $35,000 Installation cost = $10,000 %3D Depreciable basis = $545,000 Salvage value = $95,000 Investment in net working capital = 20% of next year's sales %3D %3D MACRS depreciation rates: Year 1: 0.3333 Year 2: 0.4445 Year 3: 0.1481 Year 4: 0.0741 Operating cash flow forecasts: Project's economic life = 4 years Year 1 unit sales = 3,200 units Unit growth = 4% Year 1 price per unit = $250.00/unit Year 1 cost per unit = $185.00/unit %3D %3D Inflation rate = 2.5%
Exhibit 2: Project Cash Flow Data Investment-related cash flow forecasts: Invoice price of the machinery = $500,000 Shipping charges = $35,000 Installation cost = $10,000 %3D Depreciable basis = $545,000 Salvage value = $95,000 Investment in net working capital = 20% of next year's sales %3D %3D MACRS depreciation rates: Year 1: 0.3333 Year 2: 0.4445 Year 3: 0.1481 Year 4: 0.0741 Operating cash flow forecasts: Project's economic life = 4 years Year 1 unit sales = 3,200 units Unit growth = 4% Year 1 price per unit = $250.00/unit Year 1 cost per unit = $185.00/unit %3D %3D Inflation rate = 2.5%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Please calculate investment in net working capital, net cash flows, and
Transcribed Image Text:Exhibit 2: Project Cash Flow Data
Investment-related cash flow forecasts:
Invoice price of the machinery = $500,000
Shipping charges = $35,000
Installation cost = $10,000
Depreciable basis = $545,000
Salvage value = $95,000
Investment in net working capital = 20% of next year's sales
%3D
MACRS depreciation rates:
Year 1: 0.3333
Year 2: 0.4445
Year 3: 0.1481
Year 4: 0.0741
Operating cash flow forecasts:
Project's economic life = 4 years
Year 1 unit sales = 3,200 units
Unit growth = 4%
Year 1 price per unit = $250.00/unit
Year 1 cost per unit = $185.00/unit
Inflation rate = 2.5%
Transcribed Image Text:Cost of debt
6.19%
Cost of preferred stock
Cost of common equity
7.08%
САРМ
11.40%
DCF
11.84%
Bond yield + risk premium
12.19%
Cost of retained earnings
11.81%
Cost of newly issued shares
12.57%
After-tax WACC
10.10%
Year
Year
Year
Year 3
Year
1
2
4
Unit sales
3,200
3,328
3,461
3,600
$969,084
$717,122
$40,385
$211,577
$63,473
$800,000
$592,000
$181,649
$26,352
$852,800
$631,072
$242,253
-$20,524
-$6,157
$909,085
$672,723
$80,715
Revenues
Costs
Depreciation
$155,648
$46,694
ЕBIT
Таxes
$7,905
NOPAT
$18,446
-$14,367
$108,953
$148,104
$181,649
$200,095
$242,253
$80,715
$40,385
$188,489
Depreciation
Operating cash flow
$227,885
$189,668
Initial investment
-$545,000.00
After-tax salvage value
$66,500.00
Investment in net working capital
Net cash flows
Present value of net cash flows
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