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How was $2,405 calculated? Don't need the final answer to this question, just the formula to get $2,405

How was $2,405 calculated? Don't need the final answer to this question, just the formula to get $2,405

Essentials Of Investments
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
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Suppose you are given the following information. Calculate the project's cash flows and NPV (figures in $1,000) 0 1 2 3 Year 1 Capital Investment 10,000 2. working capital 1,500 3. change in WC 1,500 4. revenues 5. Expenses 6. CCA (d=30%) 7. Pre-tax profit 8. tax (35%) 9. net income Year CFS 4,075 4,279 4,717 3,039 2,575 204 225 -1,678 17,364 18,233 15,000 15,750 16,538 10,000 10,500 11,025 11,576 12,155 1,500 1,785 1,250 875 2,550 2,700 3,728 4,538 5,203 1,821 945 1,305 1,588 1.755 2,423 2,950 3,382 3,500 1,225 2,275 0 3) CF from operations (excluding CCA tax shields) = (revenues cash expenses) (1 - tax rate) - 2 1 3 (15,000-10,000) (15,750- 10500) (16538-11025) (17364-11567) (18233-12155) ×(1-35%) *(1-35%) *(1-35%) -3250 =3762 =3951 *(1-35%) =3412 4,493 214 *(1-35%) =3583 Year 01 2 CFs -11.500 675 3208 • Total cash flows excluding tax shields = (1) + (2) + (3) 5 3 3369 3537 5629 4539 • Assume that the opportunity cost of capital is 12%. • PV of cash flows excluding tax shields=$2,405 s=1,500 0 -3039 How was this number calculated? Don't need the final answer to this question, just the formula to get $2,405
Transcribed Image Text:Suppose you are given the following information. Calculate the project's cash flows and NPV (figures in $1,000) 0 1 2 3 Year 1 Capital Investment 10,000 2. working capital 1,500 3. change in WC 1,500 4. revenues 5. Expenses 6. CCA (d=30%) 7. Pre-tax profit 8. tax (35%) 9. net income Year CFS 4,075 4,279 4,717 3,039 2,575 204 225 -1,678 17,364 18,233 15,000 15,750 16,538 10,000 10,500 11,025 11,576 12,155 1,500 1,785 1,250 875 2,550 2,700 3,728 4,538 5,203 1,821 945 1,305 1,588 1.755 2,423 2,950 3,382 3,500 1,225 2,275 0 3) CF from operations (excluding CCA tax shields) = (revenues cash expenses) (1 - tax rate) - 2 1 3 (15,000-10,000) (15,750- 10500) (16538-11025) (17364-11567) (18233-12155) ×(1-35%) *(1-35%) *(1-35%) -3250 =3762 =3951 *(1-35%) =3412 4,493 214 *(1-35%) =3583 Year 01 2 CFs -11.500 675 3208 • Total cash flows excluding tax shields = (1) + (2) + (3) 5 3 3369 3537 5629 4539 • Assume that the opportunity cost of capital is 12%. • PV of cash flows excluding tax shields=$2,405 s=1,500 0 -3039 How was this number calculated? Don't need the final answer to this question, just the formula to get $2,405
How was $2,405 calculated? Don't need the final answer to this question, just the formula to get $2,405
Transcribed Image Text:How was $2,405 calculated? Don't need the final answer to this question, just the formula to get $2,405
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