Please show all work.

Consider the project where the initial cost is $200,000, and the project has a 5-year life. There is no salvage. Depreciation is straight-line (Depreciation = 200,000/5 = 40,000)

• Unit Sales = 6000, Price per unit = $80 (Sales = 6,000 x 80)
• Variable cost per unit = $60 (Variable Costs = 6,000 x 60)

The required return is 12%, and the tax rate is 21%

What are the cash flow each year, NPV and IRR in each case, if we changed fixed costs only?

Scenario Fixed Costs

Base case. $50,000

Worst case 55,000

Best case 45,000

Show all work as follows:

Step 1: Complete the income statement for each case:

	BASE	WORST	BEST
Sales	$480,000	$480,000	$480,000
Variable Costs	360,000	360,000	360,000
Fixed Costs	50,000	55,000	45,000
Depreciation	40,000	40,000	40,000
EBIT	30,000
Taxes (21%)	6,300
Net Income	23,700

Step 2: Use the income statement data to calculate the OCF for each case

Step 3: Complete the project cash flow for each case:

			Year
	0	1	2	3	4	5
OCF		OCF	OCF	OCF	OCF	OCF
Change in NWC	0					0
NCS	-200,000					0
Total	-200,000	?	?	?	?	?

Step 4: Calculate the NPV and IRR for each case