D H 5 1. Learning Objectives 6 (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 O 10 1) Life Period of the Equipment = 4 years 12 2) New equipment cost $ * 3) Equipment ship & install cost $ 14 4) Related start up cost $ 15 5) Inventory increase $ 18 6) Accounts Payable increase $ 27) Equip. Salvage Value Estimated $ 13 End of Year (fully depreciated) 19 20 21 ESTIMATING Initial Outlay (Cash Flow, CFO, T-0) 52 23 YEAR 8) Sales for first year (1) $ 200,000 (221,000) 9) Sales increase per year 28% (35,000) 10) Operating cost: $ (120,000) (5,000) (60 Percent of Sales -60% 25,000 11) Depreciation (Straight Line)/Y $ (60,000) 5,000 12) Tax rate 35% 15,000 13) Cost of Capital (WACC) 10% CFO Q CF1 1 CF2 2 CF3 3 CF4 4 $ $ $ $ (221,000) (35,000) (5,000) (261,000) (20,000) $ $ $ $ $ $ (281.000 as Investments: 1) Equipment cost 222) Shipping and Install cost 28 3) Start up expenses 29 Total Basis Cost (1+2+3) 104) Net Working Capital 1 Inventory Inc.- Acct. Payable Inc. 52 33 Total Initial Outlay 34 s Operations: 56 Revenue 37 Operating Cost e Depreciation be EBIT 10 Taxes 51 Net Income (LOSS) 12 TAX SHIELD DUE TO LOSS 3 Add back Depreciation 14 15 Total Operating Cash Flow 16 Terminal (END of 4th YEAR 1) Release of Working Capital 2) Salvage value (after tax) Total $(60,000) $ (60.000) $ (60.000) $ (60.000) XOOXX XOOOOX XOOOX Xbox XXOOX X000X XOOK XOOOK $ $ $ $ 20,000 51 XOOOOX Sheet1 Shann