11. Installed cost of ACE generator:
Cost $250,000
Delivery and
Installed cost
$300,000
Depreciation computed based on installed cost ($300,000).
After-tax proceeds from sale:
Actual sales proceeds $79,550
12. a. Net investment calculation:
b. Net cash ows:
Depreciation is computed on the basis of installed cost = $200,000
Year R –O –Dep OEBT -Tax OEAT NCF
1 $1,000,000$700,000 $40,000 $260,000 $104,000 $156,000
$196,000
2 1,080,000 749,000 40,000 291,000 116,400 174,600 214,600
3 1,166,400 801,430 40,000 324,970 129,988 194,982 234,982
* In addition to these operating cash 8ows, year 10 NCFs are increased by
c. Net cash ows:
MACRS depreciation is computed on the basis of installed cost = $200,000
Year R –O –Dep OEBT -Tax OEAT NCF
1 $1,000,000$700,000 $28,580 $271,420 $108,568 $162,852
$191,452
2 1,080,000 749,000 48,980 282,020 112,808 178,132 227,112
3 1,166,400 801,430 34,980 329,990 131,996 197,994 232,974
* In addition to these operating cash 8ows, year 10 NCFs are increased by
13. Net investment = $100,000
Net cash ows:
Year R –O –D OEBT -T OEAT NCF
1 0 -$15,000 $14,290 $710 $284 $426 $14,716
2 0 -15,000 24,490 -9,490 -3,796 -5,694 18,796
3 0 -15,000 17,490 -2,490 -996 -1,494
14.a. Calculation of net investment:
Installed cost of new computer $160,000
b. Net cash ows:
Depreciation computed on basis of installed cost ($160,000).
Year R -O -D OEBT –T OEAT NCF
1 $32,000 -$2,000 $22,864 $11,136 $4,454.4 $6,681.6 $29,545.6
2 32,000 -2,000 39,184 -5,184 -2,073.6 -3,110.4 36,073.6
20,400
15. Net investment:
Land $100,000
Shipping 10,000
Year 20 NCF:
EBIT* $210,700
Less: Tax 84,280
* $100,000(FVIF.04,19)
** Sum of year 0, 1, and 2 working capital requirements
16. Net investment = Machine cost + Initial working capital
MACRS Depreciation:
Year 1 $1,000,000 x 14.29% = $142,900
NCF1 = (R – O – Dep)(1 – T) + Dep – NWC
NCF10 = (R – O – Dep)(1 – T) + Dep – NWC
+ Salvage value (1 – T)
17. NCF10 = (R – O – Dep)(1 – T) + Dep – NWC
+ after–tax cash 8ow from sale of assets
18. Net investment = $900,000 + $100,000
MACRS Depreciation:
Year 1 $1,000,000 x 14.29% = $142,900
NCF = (R – O – Dep) (1 – T) + Dep – NWC
NCF2 = ($800,000 – $300,000 – $244,900) (1 – 0.4)
19. NCF10 = (R – O – Dep) (1 – T) + Dep – NWC + AT Salvage
20. After-tax operating cash 8ow
= (R – O – Dep) (1 – T) + Dep – NWC
21. Net working capital investments = $5,000 + $3,000 + $2,000
Book value at the beginning of year 8 = $100,000 (0.0446)
Year 7 revenues = $25,000(FVIF.05,5)(0.9)
Year 7 cash costs = $10,000 (FVIF.10,6)
NCF7 = ($28,710 – $17,720 – $8,930)(1 – 0.4) + $8,930
22. Year 3 NCF:
Revenues $2,420,000
Less: Operating expenses 898,880
Less: Depreciation 150,000