d. While the expected new sales will be $10 million per year from the expansion, estimates range from $8 million to $12 million. What is the NPV in the worst case? In the best case? High revenue Low revenue $12,000 $8,000 11 0 $5,000 $3,500 Year Sales revenue Cost of goods sold Additional personnel Depreciation Equals net operating income Minus income tax Equals unlevered net income Plus depreciation Capital expenditures Add to NWC Free cash flow 1 $12,000 $8,400 -$2,000 $275 $1,325 $199 $1,126 $275 2 $12,000 -$8,400 -$2,000 -$275 $1,325 $199 $1,126 $275 3 $12,000 -$8,400 -$2,000 $275 $1,325 $199 $1,126 $275 Free Cash Flows in the Best Case 4 5 6 7 $12,000 $12,000 $12,000 $12,000 -$8,400 -$8,400 -$8,400 -$8,400 -$2,000 -$2,000 -$2,000 -$2,000 -$275 $275 -$275 $275 $1,325 $1,325 $1,325 $1,325 $199 $199 -$199 $199 $1,126 $1,126 $1,126 $1,126 $275 $275 $275 $275 8 $12,000 $8,400 -$2,000 -$275 $1,325 $199 $1,126 $275 9 $12,000 -$8,400 -$2,000 $275 $1,325 $199 $1,126 $275 10 $12,000 -$8,400 -$2,000 -$275 $1,325 -$199 $1,126 $275 -$1,500 $225 $1,275 -$2,750 -$600 -$4,625 $0 SO SO $0 SO SO $1,360 $41 $0 $1,401 $0 $1,401 $1,000 $2,401 $960 $960 $1,401 $1,401 $1,401 $1,401 $1,401 $1,401 NPV (000) Net Working Capital Increased receivables Increased payables Increased inventory NWC (000) $1,800 -$840 $0 $0 -$750 $350 $1,000 $600 $1,800 -$840 $1,000 $1,960 $1,800 $840 $1,000 $1,960 $1,800 -$840 $1,000 $1,960 $1,800 $1,800 $1,800 $1,800 -$840 -$840 -$840 -$840 $1,000 $1,000 $1,000 $1,000 $1,960 $1,960 $1,960 $1,960 Free Cash Flows in the Worst Case $1,800 -$840 $1,000 $1,960 $1,800 -$840 $1,000 $1,960 $960 SO d. While the expected new sales will be $10 million per year from the expansion, estimates range from $8 million to $12 million. What is the NPV in the worst case? In the best case? High revenue Low revenue $12,000 $8,000 11 0 $5,000 $3,500 Year Sales revenue Cost of goods sold Additional personnel Depreciation Equals net operating income Minus income tax Equals unlevered net income Plus depreciation Capital expenditures Add to NWC Free cash flow 1 $12,000 $8,400 -$2,000 $275 $1,325 $199 $1,126 $275 2 $12,000 -$8,400 -$2,000 -$275 $1,325 $199 $1,126 $275 3 $12,000 -$8,400 -$2,000 $275 $1,325 $199 $1,126 $275 Free Cash Flows in the Best Case 4 5 6 7 $12,000 $12,000 $12,000 $12,000 -$8,400 -$8,400 -$8,400 -$8,400 -$2,000 -$2,000 -$2,000 -$2,000 -$275 $275 -$275 $275 $1,325 $1,325 $1,325 $1,325 $199 $199 -$199 $199 $1,126 $1,126 $1,126 $1,126 $275 $275 $275 $275 8 $12,000 $8,400 -$2,000 -$275 $1,325 $199 $1,126 $275 9 $12,000 -$8,400 -$2,000 $275 $1,325 $199 $1,126 $275 10 $12,000 -$8,400 -$2,000 -$275 $1,325 -$199 $1,126 $275 -$1,500 $225 $1,275 -$2,750 -$600 -$4,625 $0 SO SO $0 SO SO $1,360 $41 $0 $1,401 $0 $1,401 $1,000 $2,401 $960 $960 $1,401 $1,401 $1,401 $1,401 $1,401 $1,401 NPV (000) Net Working Capital Increased receivables Increased payables Increased inventory NWC (000) $1,800 -$840 $0 $0 -$750 $350 $1,000 $600 $1,800 -$840 $1,000 $1,960 $1,800 $840 $1,000 $1,960 $1,800 -$840 $1,000 $1,960 $1,800 $1,800 $1,800 $1,800 -$840 -$840 -$840 -$840 $1,000 $1,000 $1,000 $1,000 $1,960 $1,960 $1,960 $1,960 Free Cash Flows in the Worst Case $1,800 -$840 $1,000 $1,960 $1,800 -$840 $1,000 $1,960 $960 SO