Corporate Project Cash Flows

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• Due Tuesday by 11:59pm
• Points 20
• Submitting a file upload
• Available Nov 10 at 12am - Nov 17 at 11:59pm 8 days

Complete the two tabs on the Corporate Project Cash Flows: New Project and Replacement Project. All the assumptions are listed to the left of the spreadsheet. Each tab will be worth 10 points.

1) Completing worksheet (3 pts)

2) Correct Cash Flows for CF0 (1 pt)

3) Correct Cash Flows for CF1 (1 pt)

4) Correct Cash Flows for CF2 (1 pt)

5) Correct Cash Flows for CF3 (1 pt)

6) Correct Cash Flows for CF4 (1 pt)

7) Correct Cash Flows for CF5 (1 pt)

8) Correct NPV and recommendation to accept or reject (1pt)

cfo Year o cf1 Year 1 cf2 Year 2 cf3 Year3 cf4 Year 4 Cf5 Year 5 Project Revenues - Cost of Goods Sold = Gross Profits Cash operating Expenses Depreciation = Net Operating Income - Taxes = Net operating profit after taxes NOPAT + Depreciation = Operating Cash Flow - Less Increase in CAPEX - Less Increase in Net operating Working Capital = Free Cash Flow Assumptions 250,000 Year 1 Revenue 3% Annual increase in sales 40% COGS as a % of Revenue 10% Operating Expenses are 10% of Revenue 300,000 Original Investment 10,000 Shipping 20,000 Installation 75,000 Salvage Value 5 Useful Life 50.000 lIncrease in A/R 20,000 Increase in Inventory 30,000 Increase in A/P 21% Tax Rate 15% Discount Rate EXCEL NPV Initial Outlay NPV Value H M cfo Year o cf1 Year 1 cf2 Year 2 cf3 Year3 cf4 Year 4 Cf5 Year 5 Assumptions New Asset Old Asset 450,000 400,000 Operating Income 125,000 350,000 Salaries 18,750 52,500 Fringe Benefits 55,000 85,000 Defects 75,000 40,000 Maintenance Operating Cash Inflows Operating Income Reduced salaries Reduced fringe benefits Reduced defects = Total Cash Inflows Cash Outflows Maintenance Depreciation Total Cash Outflows = Net Operating Income Taxes = Net operating profit after taxes NOPAT + Depreciation = Operating Cash Flow - Less Increase in CAPEX - Less Increase in Net operating Working Capital +Sale of Old Asset +/- Tax Ramifications = Free Cash Flow 300.000 10,000 20,000 75.000 5 90,000 21% 15% 120,000 Current Book Value 130,000 Market Value Shipping Installation Salvage Value 5 Useful Life! 50,000 Net Operating Working Capital Tax Rate Discount Rate EXCEL NPV Initial Outlay NPV Value Tax Ramifications Sale Price Tax Basis Gain/(Loss) Tax