P31 X V fx B C D E F G H I J K L M N 0 17 Differential Stream of Cash Flows P Q R S T U v 18 19 Denver - Not different - DON'T do an NPV for Denver 20 21 22 23 Year Denver Situation 0 India Situation 2 3 24 Employees 5 25 2 3 5 25 Wage Rate $30 31.8 33.71 35.73 37.87 40.14 26 Productivity per Hour $10.50 75 11.55 12.65 13.92 15.31 16.84 27 Productivity per Hour per Employee 3 28 Hours per day 8 2 .3 2.645 3.04175 3.04175 3.04175 29 Days per year 250 30 31 Labor Cost for Denver 1500000 $2 Annual Wage Inflation in Denver 6% 6% 6% 5% 33 Units of production 6% 10% 10% 150000 10% 10% 10% 34 Demand up 10% / year for five years 165000 181500 199650 35 Denver Employees 36 y+future hires 219615 241576.5 Indirect Costs = FIXED COSTS (do not change) 39 Revenue and working capital only relevant if revenue is different in India versus Denver. 40 41 42 43 44 45 Cost of Shipping Denver to Chicago per item 0.81 46 Shipping Inflation per year 0.75 0.78 0.84 4% 0.87 delivering to Denver warehouse 0.9 5.00 5.2 5.41 5.63 5.86 6.09 47 4% 48 49 If moved to India - year zero cost reduction 120,000 50 If moved to India - need materials sooner (260,000) 52 Cost of Capital? (%) Base rate is 14.8%, then add some premium based on your logic. 55 56 Years 57 Single Stream of Differential Cash Flows 58 Initial Outlay Annual differential cash flows -10 59 50 60 70 80 70 60 NPV $117 61 IRR 2 MIRR 54% 34% 63 Payback PI