Exhibit 2: Project Cash Flow Data Investment-related cash flow forecasts: Invoice price of the machinery = $500,000 Shipping charges = $35,000 Installation cost = $10,000 Depreciable basis = $545,000 Salvage value = $95,000 Investment in net working capital = 20% of next year's sales %3D %3D MACRS depreciation rates: Year 1: 0.3333 Year 2: 0.4445 Year 3: 0.1481 Year 4: 0.0741 Operating cash flow forecasts: Project's economic life = 4 years Year 1 unit sales = 3,200 units Unit growth = 4% Year 1 price per unit = $250.00/unit Year 1 cost per unit = $185.00/unit %3D %3D Inflation rate = 2.5% %3D

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter3: Financial Statements, Cash Flow, And Taxes
Section: Chapter Questions
Problem 12P
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How do you calculate net investment in working capital, net cash flows, present value of net cash flows, and NPV?

WACC is 10.10%

 

Exhibit 2: Project Cash Flow Data
Investment-related cash flow forecasts:
Invoice price of the machinery = $500,000
Shipping charges = $35,000
Installation cost = $10,000
Depreciable basis = $545,000
Salvage value = $95,000
Investment in net working capital = 20% of next year's sales
%3D
MACRS depreciation rates:
Year 1: 0.3333
Year 2: 0.4445
Year 3: 0.1481
Year 4: 0.0741
Operating cash flow forecasts:
Project's economic life = 4 years
Year 1 unit sales = 3,200 units
Unit growth = 4%
Year 1 price per unit = $250.00/unit
Year 1 cost per unit = $185.00/unit
Inflation rate = 2.5%
Transcribed Image Text:Exhibit 2: Project Cash Flow Data Investment-related cash flow forecasts: Invoice price of the machinery = $500,000 Shipping charges = $35,000 Installation cost = $10,000 Depreciable basis = $545,000 Salvage value = $95,000 Investment in net working capital = 20% of next year's sales %3D MACRS depreciation rates: Year 1: 0.3333 Year 2: 0.4445 Year 3: 0.1481 Year 4: 0.0741 Operating cash flow forecasts: Project's economic life = 4 years Year 1 unit sales = 3,200 units Unit growth = 4% Year 1 price per unit = $250.00/unit Year 1 cost per unit = $185.00/unit Inflation rate = 2.5%
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