Question: A project requires an initial investment of $300,000 to purchase a processing equipment. This equipment will be depreciated on a straight line schedule over 5 years. The sales revenue is $400,000 each year for three years and the cost is $200,000 each year for three years. At the end of the third year, the equipment will be sold at its book value. The working capital required is $100,000 at t=0, $120,000 at t=1, $120,000 at t=2, and 0 at t=3. The tax rate is 40%, and the cost of capital 15%.
Calculate NPV, IRR, payback period, and profitability index of the project
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3 |
| Capital Expenditure |
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| Revenue |
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| Cost |
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| Gross Profit |
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| Depreciation |
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| EBT |
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| Tax |
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| NI |
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| Calculate Free Cash Flows |
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| Add back depreciaiton |
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| Net Working Capital (NWC) |
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| Change in NWC |
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| Salvage |
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| Free Cash Flows |
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