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Calculate cash flows and net present value for equipment purchase.

Need to know how you calculate net present value and also cash flows.

Equipment/ Fixtures cost: $200,000 and will be depreciated over 5 years to $0. Need to increase its net working capital by $200,00 at time 0.

First year sales $1million and increase at an annual rate of %8 over 10 years, Operating expenses are $700,000 during 1st year and increase %7 annually. Salvage value at the end of 10 yrs is $10,000
Marginal Tax Rate is 40 %
Required Return 18%

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The solution provides an excellent explanation with formulas, narrative and calculations to arrive at the correct answers.

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