Complete on an EXCEL spreadsheet. Please show formulas that are inputted into Excel.

1. The Loviscek Co. is considering the purchase of a new machine. Financial projections for the investment are provided below.

Year	0	1	2
Cost of New Machine	150,000
Revenues		200,000	250,000
Variable Costs		100,00	115,000
Fixed Costs		50,000	50,000
Depreciation		25,000	25,000
Net Working Capital	20,000	25,000	30,000

After Year 2 cash flows will grow at a constant rate of 3% forever. The company discounts all cash flows at 10% and has a marginal tax rate of 20%.

What is the Net Present Value of the project?

2. BB Co. is considering the purchase of a new machine. The new machine has an expected useful and depreciable life of two years, costs $100,000, has an expected salvage value of $15,000 for depreciation purposes and an expected market value of $15,000 in two years. The new machine requires an additional $10,000 in working capital today, which is fully recoverable at the end of the project. The new machine is expected to increase revenues by $40,000 and reduce costs by $20,000 per year for the next two years. The company uses straight-line depreciation for all of its assets, has a required rate of return equal to 10%, and a marginal tax rate of 20%. What is the Net Present Value of the project?

• NM useful life = 2 years

• NM depreciable life = 2 years

• NM Cost = 100,000

• NM SV for depreciation in 2 years = 15,000

• NM expected mkt. value in 2 years = 15,000

• Increased Revenues 40,000 per year for 2 years

• Reduced Costs 20,000 per year for 2 years

• Increased Working Capital today = 10,000

• Required rate of return = 10%

• Marginal tax rate = 20%