(Investment ) (Income /year ) 1 (Cash flows w/o taxes ) (IRR )
(Free Cash flows:(After ) tax opertaing income +Dep 600,000.00 200,000.00 (600,000.00) Err:523
2 (Income - Depr. ) 140,000.00 (After tax income ) 77,000.00 (After tax opertaing income +Depreciation ) 137,000.00 (Cash flows ) (600,000.00) (IRR )
200,000.00
137,000.00
Err:523
3 (Since the return Is higher than the expected return of 12%, he shud go ahead with the inve 4 (Income ) (Depreciation ) (Income - Depr. ) (After tax income ) (Free cash flows ) (IRR )
(600,000) -179.22%
5 (Income - Depr. ) 140,000.00 (After tax income ) 77,000.00 (After tax opertaing income +Depreciation ) 137,000.00 (Cash flows ) (900,000.00) (IRR ) 6 (Old Equip )
200,000.00
11.96% 600,000.00
(Income ) (Depreciation on new ) (Depreciation on old ) (Net Depreciation ) (Income - Depr. ) (After tax income ) (Free cash flows from income ) (Investment ) (1,000,000.00) (Addiotional income from sales of equip ) 200,000.00 (Net Cash flow ) (800,000.00) (IRR )
200,000.00 200,000.00 200,000.00
10.10%
200,000.00 333,333.33 200,000.00 133,333.33 66,666.67 36,666.67 170,000.00
170,000.00
7 (Old Equip ) (Income ) (Depreciation ) (Income - Depr. ) (After tax income ) (Free cash flows from income ) (Investment ) (Addiotional income from sales of equip ) (Net Cash flow ) (IRR ) 8 (Old Equip ) (Income ) (Depreciation ) (Income - Depr. ) (After tax income ) (Free cash flows from income ) (Investment ) (Addiotional income from sales of equip ) (Net Cash flow ) (IRR ) 9 (Periods: ) (Inflation adjusted Cash flow ) (IRR )
600,000.00
(600,000.00)
200,000.00 200,000.00 200,000.00 ###
(600,000.00) (800,000.00) 11.85% 600,000.00
(600,000.00) (600,000.00)
200,000.00 200,000.00 200,000.00
200,000.00
14.06% (600,000.00) 9.67%
1 192,307.69
er tax opertaing income +Depreciation )
200,000.00 (NPV )
137,000.00 (NPV )
200,000.00
200,000.00
200,000.00
200,000.00
200,000.00
137,000.00
137,000.00
137,000.00
137,000.00
85,000.00
0.62
$742,016.28
137,000.00 $174,080.55
(Payback: )
e shud go ahead with the investment.. ) 200,000.00 80,000.00 120,000.00 66,000.00 146,000.00 (NPV )
146,000.00 (NPV ) (New Equip )
200,000.00 40,000.00 160,000.00 88,000.00 128,000.00
200,000.00 40,000.00 160,000.00 88,000.00 128,000.00
200,000.00 40,000.00 160,000.00 88,000.00 128,000.00
200,000.00 40,000.00 160,000.00 88,000.00 128,000.00
200,000.00 40,000.00 160,000.00 88,000.00 128,000.00
128,000.00
128,000.00
128,000.00
128,000.00
$201,863.75
128,000.00 $1,544.28 ###
(New income )400,000.00
200,000.00 133,333.33 80,000.00 53,333.33 146,666.67 80,666.67 134,000.00
200,000.00 66,666.67 40,000.00 26,666.67 173,333.33 95,333.33 122,000.00
200,000.00 66,666.67 40,000.00 26,666.67 173,333.33 95,333.33 122,000.00
200,000.00 66,666.67 40,000.00 26,666.67 173,333.33 95,333.33 122,000.00
200,000.00 66,666.67 40,000.00 26,666.67 173,333.33 95,333.33 122,000.00
200,000.00 66,666.67 40,000.00 26,666.67 173,333.33 95,333.33 122,000.00
134,000.00
122,000.00
122,000.00
122,000.00
122,000.00
122,000.00
(NPV )
$58,249.32
(New Equip )
###
(New income )400,000.00
400,000.00 333,333.33 66,666.67 36,666.67 370,000.00
400,000.00 133,333.33 266,666.67 146,666.67 280,000.00
400,000.00 66,666.67 333,333.33 183,333.33 250,000.00
400,000.00 66,666.67 333,333.33 183,333.33 250,000.00
400,000.00 66,666.67 333,333.33 183,333.33 250,000.00
400,000.00 66,666.67 333,333.33 183,333.33 250,000.00
370,000.00
280,000.00
250,000.00
250,000.00
250,000.00
250,000.00
(NPV ) (New Equip ) 400,000.00 120,000.00 66,666.67 36,666.67 370,000.00 ###
$7,927.57 ###
(New income )400,000.00
400,000.00 333,333.33 266,666.67 146,666.67 280,000.00
400,000.00 133,333.33 333,333.33 183,333.33 250,000.00
400,000.00 66,666.67 333,333.33 183,333.33 250,000.00
400,000.00 66,666.67 333,333.33 183,333.33 250,000.00
400,000.00 66,666.67 333,333.33 183,333.33 250,000.00
(630,000.00) 280,000.00
250,000.00
250,000.00
250,000.00
250,000.00
(The IRR is higher than the answer 7, even though the total cah flow is same for total of 10 years, so 2 3 4 5 6 7 (582,470.41) 248,918.98 213,701.05 205,481.78 197,578.63 189,979.45 (NPV )
$86,338.59
200,000.00 200,000.00
###
137,000.00 137,000.00
###
(4.62 years )
200,000.00 200,000.00 ### 40,000.00 40,000.00 40,000.00 160,000.00 160,000.00 ### 88,000.00 88,000.00 88,000.00 128,000.00 128,000.00 ###
128,000.00 128,000.00
###
200,000.00 200,000.00 ### (This is incremental savings ) 66,666.67 66,666.67 66,666.67 40,000.00 40,000.00 40,000.00 26,666.67 26,666.67 26,666.67 173,333.33 173,333.33 ### 95,333.33 95,333.33 95,333.33 122,000.00 122,000.00 ###
122,000.00 122,000.00
###
400,000.00 66,666.67 333,333.33 183,333.33 250,000.00
400,000.00 ### 66,666.67 66,666.67 333,333.33 ### 183,333.33 ### 250,000.00 ###
250,000.00 250,000.00
400,000.00 66,666.67 333,333.33 183,333.33 250,000.00
###
400,000.00 ### 66,666.67 66,666.67 333,333.33 ### 183,333.33 ### 250,000.00 ###
250,000.00 250,000.00
###
58,333.33
### 996,250.00
same for total of 10 years, so the company is better off this way ) 8 9 182,672.55 175,646.68
10 ###
1 (448,000.00) 152,000.00
152,000.00
152,000.00
152,000.00
152,000.00
110,600.00
110,600.00
110,600.00
110,600.00
Err:523 2
92,000.00 50,600.00 110,600.00 (489,400.00) 110,600.00 Err:523
3
152,000.00
152,000.00
152,000.00 152,000.00
###
110,600.00
110,600.00
110,600.00 110,600.00
###
###
