TABLE 4 You are considering a new product launch: Equipment for the project will cost $875,000 The project will have a four-year life, and have no salvage value. Depreciation is straight-line to zero over the four years. The required return on the project is 11%, and the tax rate is 35%. Projected annual sales and cost figures are shown below (sales a Based on the information given, calculate OCF and NPV Equipment cost Project length (years) Required return Tax rate $82 $3,9 $2,8 $3 Annual Sales Annual Variable costs Annual Fixed costs Annual Depreciation Annual EBIT Annual Taxes Annual OCF Cash flows YEAR 3
TABLE 4 You are considering a new product launch: Equipment for the project will cost $875,000 The project will have a four-year life, and have no salvage value. Depreciation is straight-line to zero over the four years. The required return on the project is 11%, and the tax rate is 35%. Projected annual sales and cost figures are shown below (sales a Based on the information given, calculate OCF and NPV Equipment cost Project length (years) Required return Tax rate $82 $3,9 $2,8 $3 Annual Sales Annual Variable costs Annual Fixed costs Annual Depreciation Annual EBIT Annual Taxes Annual OCF Cash flows YEAR 3
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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Transcribed Image Text:TABLE 4
You are considering a new product launch:
Equipment for the project will cost $875,000
The project will have a four-year life, and have no salvage value.
Depreciation is straight-line to zero over the four years.
The required return on the project is 11%, and the tax rate is 35%.
Projected annual sales and cost figures are shown below (sales and costs are estimated to be identical for each year 1-4)
Based on the information given, calculate OCF and NPV
Equipment cost
Project length (years)
Required return
$875,000
4
11%
Tax rate
35%
Annual Sales
Annual Variable costs
$3,948,000
$2,869,000
$345,000
Annual Fixed costs
Annual Depreciation
Annual EBIT
Annual Taxes
Annual OCF
Cash flows
YEAR
3
4
PROJECT NPV
"you MUST use NPV function in excel
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