NEW PROJECT ANALYSIS You must analyze a potential new product—a caulking com- pound that Cory Materials’...

4.4 Ratings (677 Votes)

	Cost of New Machine	$ 150,000.00
	Shipping & Installation cost	$ 25,000.00
	Total Investment Cost	$ 175,000.00
	Investment in net working capital required
	Inventory & Accounts Receivable	$ 35,000.00
	Accounts Receivable	$ (15,000.00)
	Investment in net working capital required	$ 20,000.00

	B	C	D	E	F
14	Year	Year 0	Year 1	Year 2	Year 3
15	Investment	$ (175,000.00)
16	Working Capital	$ (20,000.00)
17	Total Revenue		$ 373,750.00	$ 373,750.00	$ 373,750.00
18	Less: Variable cost		$ 224,250.00	$ 224,250.00	$ 224,250.00
19	Less: Fixed Cost		$ 70,000.00	$ 70,000.00	$ 70,000.00
20	Less: Depreciation		$ 58,327.50	$ 77,787.50	$ 25,917.50
21	Profit before Tax		$ 21,172.50	$ 1,712.50	$ 53,582.50
22	Tax		$ 8,469.00	$ 685.00	$ 21,433.00
23	After tax Operating Income=(A)		$ 12,703.50	$ (685.00)	$ 32,149.50
24	Plus: Depreciation=(B)		$ 58,327.50	$ 77,787.50	$ 25,917.50
25	Operating Cash flow=(A)+(B)		$ 71,031.00	$ 77,102.50	$ 58,067.00
26	After tax Salvage Value=($15000*.60)				$ 9,000.00
27	Recovery of Working Capital				$ 20,000.00
28	Total Operating Cash Flow=(A)	$ (195,000.00)	$ 71,031.00	$ 77,102.50	$ 87,067.00
29	P.V Factor 17.5% for 5 years=(B)	1	0.909	0.826	0.751
30	P.V.=(A)*(B)	$ (195,000.00)	$ 64,567.18	$ 63,686.67	$ 65,387.32
31	NPV=(Total of P.V of all the three years)	$ (1,358.84)
32	Cumulative Cash flow	$ (195,000.00)	$ (123,969.00)	$ (46,866.50)	$ 40,200.50
33
34	Cost of Capital	10%
	Payback Period=	3 Years
	IRR(C28:F28)	10%
	MIRR(C28:F28,c34,c34)	10%


		Year 1	Year 2	Year 3
	Depreciation=	($175000*33.33%)	($175000*44.45%)	($175000*14.81%)

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