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Particulars Year 0 Year 1 Year 2 Year 3

The document shows financial projections for an initial investment project over 4 years. It projects sales, costs, earnings, cash flows and net present values using discount rates. The initial investment is $956,000. Projected operating cash flows are positive each year from $366,500 in Year 1 to $379,700 in Years 2-3. Using a 13% discount rate, the net present value is estimated to be $865,529.12. A sensitivity analysis shows the NPV would drop by $12,269.69 if units sold decreased by 500 and increase by $53,040 if operating cash flows increased by that amount.

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Nicholas Anthony
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88 views3 pages

Particulars Year 0 Year 1 Year 2 Year 3

The document shows financial projections for an initial investment project over 4 years. It projects sales, costs, earnings, cash flows and net present values using discount rates. The initial investment is $956,000. Projected operating cash flows are positive each year from $366,500 in Year 1 to $379,700 in Years 2-3. Using a 13% discount rate, the net present value is estimated to be $865,529.12. A sensitivity analysis shows the NPV would drop by $12,269.69 if units sold decreased by 500 and increase by $53,040 if operating cash flows increased by that amount.

Uploaded by

Nicholas Anthony
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Particulars Year 0 Year 1 Year 2 Year 3

Initial Investment -$ 956,000.00


Sales $ 3,089,580.00 $ 3,089,580.00 $ 3,089,580.00
Less: Variable Cost $ 1,874,080.00 $ 1,874,080.00 $ 1,874,080.00
Less: Fixed Cost $ 764,000.00 $ 764,000.00 $ 764,000.00
Less: Depreciation $ 239,000.00 $ 239,000.00 $ 239,000.00
Earnings before Tax $ 212,500.00 $ 212,500.00 $ 212,500.00
Less: Tax @ 30% $ 85,000.00 $ 85,000.00 $ 85,000.00
Net Income $ 127,500.00 $ 127,500.00 $ 127,500.00
Add: Depreciation $ 239,000.00 $ 239,000.00 $ 239,000.00
Operating Cash Flows -$ 956,000.00 $ 366,500.00 $ 366,500.00 $ 366,500.00
PV Factors @ 13% 1.00 0.885 0.783 0.693
Present Values -$ 956,000.00 $ 324,336.28 $ 287,023.26 $ 254,002.88
NPV

Particulars Year 0 Year 1 Year 2 Year 3


Initial Investment -$ 956,000.00
Sales $ 3,145,500.00 $ 3,145,500.00 $ 3,145,500.00
Less: Variable Cost $ 1,908,000.00 $ 1,908,000.00 $ 1,908,000.00
Less: Fixed Cost $ 764,000.00 $ 764,000.00 $ 764,000.00
Less: Depreciation $ 239,000.00 $ 239,000.00 $ 239,000.00
Earnings before Tax $ 234,500.00 $ 234,500.00 $ 234,500.00
Less: Tax @ 30% $ 93,800.00 $ 93,800.00 $ 93,800.00
Net Income $ 140,700.00 $ 140,700.00 $ 140,700.00
Add: Depreciation $ 239,000.00 $ 239,000.00 $ 239,000.00
Operating Cash Flows -$ 956,000.00 $ 379,700.00 $ 379,700.00 $ 379,700.00
PV Factors @ 13% 1.00 0.885 0.783 0.693
Present Values -$ 956,000.00 $ 336,017.70 $ 297,360.80 $ 263,151.15
New NPV

Particulars
Year 4 Initial Project Cost $ 956,000.00
Required Return 13%
$ 3,089,580.00
$ 1,874,080.00 Price per Unit $ 34.95
$ 764,000.00 Less:
$ 239,000.00 Variable Cost/unit $ 21.20
$ 212,500.00 Contribution $ 13.75
$ 85,000.00 Units Sold 88,400
$ 127,500.00
$ 239,000.00
$ 366,500.00 <--- BASE Op. Cash Fixed Cost $ 764,000.00
0.613 Tax Rate 40%
$ 224,781.31
$ 134,143.74 Years $ 4.00
Depreciation $ 239,000.00
Year 4

$ 3,145,500.00
$ 1,908,000.00 Sales $ 3,089,580.00
$ 764,000.00 Less:
$ 239,000.00 Variable Cost $ 1,874,080.00
$ 234,500.00 Fixed $ 764,000.00
$ 93,800.00 Depreciation $ 239,000.00
$ 140,700.00 Earnings before taxes $ 212,500.00
$ 239,000.00 Less: Taxes $ 85,000.00
$ 379,700.00 Net Income $ 127,500.00
0.613
$ 232,877.12
$ 173,406.76 $ 39,263.02
$ 1,600.00
Sensitivity of NPV $ 24.539

Unit Drop 500

NPV DROP $ 12,269.69

$ 313,460.00
Increase in OCF $ 53,040.00

Sensitivity of OCF -$ 53,040.00


$ 22.20

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