6. (20 Percent) The expected cash flow forecasts of an investment are listed on the table...

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6. (20 Percent) The expected cash flow forecasts of an investment are listed on the table below. The investment has a 12% cost of capital and a 5-year holding period. The depreciation will be calculated using straight line method and ignoring salvage value. Initial investment ($ thousands) Salvage value ($ thousands) Initial revenues ($ thousands) Variable costs (% of revenues) Initial fixed costs ($ thousands) Inflation rate (%) Discount rate (%) Receivables (% of sales) Inventory (% of next year's costs) Tax rate (%) Calculate: Cash flows from working capital Cash flows from operating a. b. c. NPV of this investment d. 15,000 2,500 15,000 40.0% 4,500 4.0% 10.0% 18.0% 15.0% 21.0% NPV of the investment, if the forecasted inflation rate changes from 4% to 8% and the discount rate changes from 10% to 14%. 6. (20 Percent) The expected cash flow forecasts of an investment are listed on the table below. The investment has a 12% cost of capital and a 5-year holding period. The depreciation will be calculated using straight line method and ignoring salvage value. Initial investment ($ thousands) Salvage value ($ thousands) Initial revenues ($ thousands) Variable costs (% of revenues) Initial fixed costs ($ thousands) Inflation rate (%) Discount rate (%) Receivables (% of sales) Inventory (% of next year's costs) Tax rate (%) Calculate: Cash flows from working capital Cash flows from operating a. b. c. NPV of this investment d. 15,000 2,500 15,000 40.0% 4,500 4.0% 10.0% 18.0% 15.0% 21.0% NPV of the investment, if the forecasted inflation rate changes from 4% to 8% and the discount rate changes from 10% to 14%.

Answer rating: 100% (QA)

To calculate the cash flows from working capital cash flows from operating activities and the net present value NPV of the investment we need to follow these steps Step 1 Calculate the depreciation ex... View the full answer