1. Learning Objectives

(a) Develop proforma Project Income Statement Using Excel Spreadsheet

(b) Compute Net Project Cash flows, NPV, IRR and PayBack Period (c) Develop Problem-Solving and Critical Thinking Skills

1) Life Period of the Equipment = 4 years 2) New equipment cost $X

3) Equipment ship & install cost $

4) Related start up cost $

5) Inventory increase $

6) Accounts Payable increase $

7) Equip. Salvage Value Estimated $ End of Year 4 (fully depreciated )

ESTIMATING Initial Outlay (Cash Flow, CFo, T= 0)

YEAR

Investments:

1) Equipment cost 2) Shipping and Install cost

3) Start up expenses

Total Basis Cost (1+2+3) 4) Net Working Capital Inventory Inc.- Acct. Payable Inc. $

Total Initial Outlay

Operations:

Revenue Operating Cost Depreciation

(35,000) (5,000)

25,000 5,000 15,000

8) Sales for first year (1) 9) Sales increase per year 10) Operating cost:

(60 Percent of Sales) 11) Depreciation (Straight Li 12) Tax rate 13) Cost of Capital (WACC)

CF0 CF1 CF2 012

(20,000) $

- $