Merge & Center G3 A C E Learning Objectives H 1.Understand how to use EXCEL Spreadsheet (a) Develop proforma Income Statement Using Excel Spreadsheet (b) Compute Net Project Cashflows, NPV, and IRR (c) Develop problem-solving and critical thinking skills and make long-term investment decisions 7 10 11 1) Life Period of the Equipment 4 years 12 2) Now equipment cost 13 3) Equipment ship &install cost 14 4) Related start up cost 1s 5) Inventory increase 16 6) Accounts Payable increase 17 7) Equip. salvage value before tax 8) Sales for first year (1) S (200,000) 9) Sales increase per year (35,000) 10) Operating cost (60 % of Sales) (5,000) (as a percent of sales in Year 1) 25,000 11) Depreciation (Straight Line)YR 200.000 5% (120,000) 60 % (60,000) 21% 10 % 5,000 12) Marginal Corporate Tax Rate (T) 15,000 13) Cost of Capital (Discount Rate) 19 20 21 ESTIMATING Initial Outlay (Cash Flow, CFo, Te 0) 23 24 Year CFO CF1 CF2 CF3 CF4 2 31 25 Investments: 2s 1) Equipment cost 27 2) Shipping and Install cost 2 3) Start up expenses Total Basis Cost (1+2+3) 30 4) Net Working Capital Total Initial Outlay 4 29 31 2 Operations 3 Revenue Operating Cost 3 Depreciation EBIT Taxes Net Income Sheett See2 Ready esc & Operations 34 Revenue Operating Cost Depreciation EBIT 33 35 36 37 38 Taxes Net Income 39 40 41 Add back Depreciation 42 Total Operating Cash Flow 43 XXxxx XXXXX XXXX XXXXX 44 45 Terminal: 46 1) Change in net WC 47 2) Salvagevalue (after tax) S S 20,000 Salvage Value Before Tax (1-T) XXXXX XXXxx Total 44 40 Project Net Cash Flows 50 $ S $ 51 52 NPV IRR Payback 54 Q#1 Would you accept the project based on NPV, IRR? Sheet2 Sheet3 Sheett Ready Please add the formulas far Cal culation