1) ABC Corporation has hired you to evaluate a new four-year project for the firm. The project will require the purchase of a $803,600.00 work cell. Further, it will cost the firm $57,900.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $65,200.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated but has a market value of $5,000.00. Finally, the firm will invest $10,700.00 in net working capital to ensure the project has sufficient resources to be successful.
The project will generate annual sales of $919,000.00 with expenses estimated at 39.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 40.00%.
The work cell is estimated to have a market value of $450,000.00 at the end of the fourth year. The firm expects to reclaim 83.00% of the final NWC position. The cost of capital is 12.00%.
What is the terminal cash flow for the project?
2) ABC Corporation has hired you to evaluate a new four-year project for the firm. The project will require the purchase of a $784,500.00 work cell. Further, it will cost the firm $54,200.00 to get the work cell delivered and installed. The work cell will be straight-line depreciated to zero with a 20-year useful life. The project will require new employees to be trained at a cost of $59,200.00. The project will also use a piece of equipment the firm already owns. The equipment has been fully depreciated but has a market value of $5,700.00. Finally, the firm will invest $10,700.00 in net working capital to ensure the project has sufficient resources to be successful.
The project will generate annual sales of $901,000.00 with expenses estimated at 36.00% of sales. Net working capital will be held constant throughout the project. The tax rate is 38.00%.
The work cell is estimated to have a market value of $494,000.00 at the end of the fourth year. The firm expects to reclaim 83.00% of the final NWC position. The cost of capital is 13.00%.
What is the NPV of the project if we end the project after 4 years?
