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The Lost in Space corporation is trying to finally build a space ship that won't end up stranding everyone on it in some random part of the galaxy. To do so they are considering a new three-year project that will require an initial investment of $400 million. These initial assets will be depreciated straight-line to zero over their three-year tax life. The firm will be able to sell these assets at the end of the project for $45,250,000. The project is estimated to generate the following revenues during it's three year life: $315,485,369 in year one, $325,690,023 in year two, and $344,555,000 in year three. The firm expects that their costs will be equal to 47.75% of the projects same year revenues. They expect that project net working capital (in the form of inventory required) will be equal to 10.25% of the next year's revenue. The firms tax-rate is 21%. What are the project's cash flows from assets for years 0-3? What is the IRR on this project? Use available Excel template and complete using "best practices" (use formulas - no hardcoding in model). This means that every cell must be calculated inside of excel! Do not use your calculator and then just type in numbers. Revenue t=1 Revenue t=2 Revenue t=3 Investment Depr. years Final book value FA Sale value NWC req't Costs Tax rate Revenue Expenses Depreciation EBIT Taxes Net Income (NI) OCF NWC total Change in NWC Net Capital Spending CFFA $ $ $ $ $ $ $ Year 0 SL You may use positive or negative numbers in this section below in any consistent manner. Please make sure your Excel formulas are consistent and that your cash flow numbers are correct. Year 1 Year 2 Year 3 Project IRR Total Cash Flow Discount rate a) NPV b) Accept/Reject c) IRR $ Year 0 (525,000) $ Year 1 215,230 $ Year 2 226,369 $ < ok if consistent with above - hardcoded OK Year 3 294,100 12.50% The Lost in Space corporation is trying to finally build a space ship that won't end up stranding everyone on it in some random part of the galaxy. To do so they are considering a new three-year project that will require an initial investment of $400 million. These initial assets will be depreciated straight-line to zero over their three-year tax life. The firm will be able to sell these assets at the end of the project for $45,250,000. The project is estimated to generate the following revenues during it's three year life: $315,485,369 in year one, $325,690,023 in year two, and $344,555,000 in year three. The firm expects that their costs will be equal to 47.75% of the projects same year revenues. They expect that project net working capital (in the form of inventory required) will be equal to 10.25% of the next year's revenue. The firms tax-rate is 21%. What are the project's cash flows from assets for years 0-3? What is the IRR on this project? Use available Excel template and complete using "best practices" (use formulas - no hardcoding in model). This means that every cell must be calculated inside of excel! Do not use your calculator and then just type in numbers. Revenue t=1 Revenue t=2 Revenue t=3 Investment Depr. years Final book value FA Sale value NWC req't Costs Tax rate Revenue Expenses Depreciation EBIT Taxes Net Income (NI) OCF NWC total Change in NWC Net Capital Spending CFFA $ $ $ $ $ $ $ Year 0 SL You may use positive or negative numbers in this section below in any consistent manner. Please make sure your Excel formulas are consistent and that your cash flow numbers are correct. Year 1 Year 2 Year 3 Project IRR Total Cash Flow Discount rate a) NPV b) Accept/Reject c) IRR $ Year 0 (525,000) $ Year 1 215,230 $ Year 2 226,369 $ < ok if consistent with above - hardcoded OK Year 3 294,100 12.50%
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Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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