Purchase Solution

# Develop an NPV profile graph

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Can you create an NPV Profile graph based on the Excel spreadsheet analysis information provided?

** Please see the attached file for the Excel formatted problem description **

Inputs
ATSV old @ t=0 305,000 ATSV formula = Market salvage value-(Market salvage value-Book value)*tax rate
Equipment 2,000,000
Tax Credit 100,000
Depreciaton per year 300,000
Sales period 1 1,000,000 growth: g yrs 2-3 = 15% g yrs 4-6 = 5%
CoGS %of sales 45%
SG&A exp. %of sales 10%
ATSV new @ t=6 260,000

Operating Life CFs
Time 0 1 2 3 4 5 6
Sales \$1,000,000 \$1,150,000 \$1,322,500 \$1,388,625 \$1,458,056 \$1,530,959
- COGS 450,000 67,500 77,625 29,756 31,244 32,806
- SG&A expenses 100,000 15,000 17,250 6,613 6,943 7,290
- Depreciation 300,000 300,000 300,000 300,000 300,000 300,000
= EBIT 150,000 767,500 927,625 1,052,256 1,119,869 1,190,863
-Taxes (40%) 60,000 307,000 371,050 420,903 447,948 476,345
= Net Income 90,000 460,500 556,575 631,354 671,921 714,518
+ Depreciation 300,000 300,000 300,000 300,000 300,000 300,000
= Operating CF 390,000 760,500 856,575 931,354 971,921 1,014,518

Time 0 Investments
Equipment -2,000,000
ATSV old 305,000
Tax credit 100,000
NWC -200,000

Terminal Non-OCF:
ATSV new @ t=6 260,000
NWC 200,000
= Net Cash Flow -\$1,795,000 \$390,000 \$760,500 \$856,575 \$931,354 \$971,921 \$1,474,518
= Cummulative CF -\$1,795,000 -\$1,405,000 -\$644,500 \$212,075 \$1,143,429 \$2,115,350 \$3,589,868

Cost of Capital 8%
NPV \$2,173,336.49
IRR = 35.0%
PBP = 2.75
PI = 2.21

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