Using the financial forecast and trying to get the NPV by using the present value of 12%, using the net cash flow before depreciation that is adjusted for working capital items that effect net cash flow. The amount per year is discounted at 12%, keeping in mind to add the salvage value into years 10 cashflow.

ZXY Company is a food product company. ZXY is considering expanding to two new products and a second production facility. The food products are staples with steady demands. The proposed expansion will require an investment of $7,000,000 for equipment with an assumed ten-year life, after which all equipment and other assets can be sold for an estimated $1,000,000. They will be renting the facility. ZXY requires a 12 percentreturn on investments. You have been asked to recommend whether or not to make the investment.

ZXY - Forecast
			Ten Years
Pro-Forma Income Statement	Year 1	Year 10	Total
Brand new Acme System - full system
Income
Revenue
Product A	2,400,000	3,900,000	34,640,000
Product B		5,500,000	22,200,000
Total Revenue	2,400,000	9,400,000	56,840,000
Cost of Goods Sold
Pest Control	50,000	73,205	702,190
SQF FDA mandates	90,000	30,000	600,000
Rent - Plant	400,000	478,037	4,379,888
Plant Equip. - Fklf - Scrb/Lease	40,000	64,000	616,000
Plant Equip. - Ongoing maintenance	50,000	75,000	720,000
Plant Equip. - Parts	40,000	50,000	490,000
Miscellaneous - Equipment	15,000	15,000	150,000
Building repairs	25,000	25,000	250,000
Plant supplies	100,000	194,532	1,405,767
Plant Utilities	120,000	240,000	2,250,000
Garbage removal/Janitorial	30,000	52,470	495,388
Plant telephone	7,200	7,200	72,000
Plant payroll expense	495,000	1,125,000	9,060,000
Health Benefits	45,360	100,000	947,560
WC & P/R Expense	59,400	135,000	1,087,200
Installation/Additional Equipment	250,000	-	450,000
Total COGS	1,816,960	2,664,444	23,675,993
Gross Profit	583,040	6,735,556	33,164,007
Expenses Other than GOGS
Liability Insurance	60,000	104,940	990,776
Bank Service Charges	1,500	1,500	15,000
Interest on debt	90,627	111	1,121,754
Incentive Plan		16,500	145,200
Management	180,000	190,000	1,850,000
Workers Comp./P/R Taxes	21,600	22,800	222,000
Health Insurance Benefit	4,200	5,590	54,004
Office/Administrative Expenses	12,000	17,569	168,526
Legal and Professional - Tax	30,000	10,000	120,000
Cellular phones	5,000	5,000	50,000
Internet Services	4,400	6,442	61,793
Postage & Delivery	1,100	1,611	15,448
Office supplies	11,000	10,981	108,829
Employee Food & Beverage	1,100	1,611	15,448
Local/Business Taxes	1,100	1,611	15,448
Property Taxes	12,000	15,000	147,000
Travel - Equip. Consultants	25,000	16,500	173,500
Licenses and Permits	10,000	10,000	100,000
Total Expense	470,627	437,765	5,374,724
Net Income before Depreciation	112,413	6,297,791	27,789,282
Depreciation Expense (	185,770	33,450	3,350,000
Tax Expense	-	1,879,302	7,100,255
Net Income	(73,357)	4,385,039	17,339,027
#SPILL!
Forecast of Cash Flows
Net Income before Depreciation	112413	6,297,791	27,789,282
Deduct startup costs	-	-	-
Cash flow before income taxes	112,413	6,297,791	27,789,282
Working Capital	-	-	-
Lease Payments - Principal	155,146	7,389	3,350,001
Pre-Tax Cash Flow	(42,733)	6,290,402	24,439,282
Taxes	-	1,879,302	7,100,255
After tax - Cash Flow	(42,733)	4,411,100	17,339,027
SALVAGE		1,000,000
		5,411,100
12% Discount Rate	0.8929	0.3220
Present value of cashflows	(38,156.1528)	1,742,374.2386	7,269,547.3917
			7,000,000.0000
		NPV	269,547