Question

YEARS 0 1 2 3 4 5 6 New Plant Costs (24,000,000) Land (4,300,000) Inventory (1,000,000)...

YEARS 0 1 2 3 4 5 6
New Plant Costs (24,000,000)
Land (4,300,000)
Inventory (1,000,000)
Sales           63,000,000           63,000,000           63,000,000           63,000,000           63,000,000             63,000,000
Costs (20,000,000) (20,000,000) (20,000,000) (20,000,000) (20,000,000) (20,000,000)
Depreciation Expense (3,429,600) (5,877,600) (4,197,600) (2,997,600) (2,143,200) (2,140,800)
Profit Before Tax           39,570,400           37,122,400           38,802,400           40,002,400           40,856,800             40,859,200
40% Tax Rate (15,828,160) (14,848,960) (15,520,960) (16,000,960) (16,342,720) (16,343,680)
Profit After Taxes           23,742,240           22,273,440 23,281,440           24,001,440           24,514,080             24,515,520
Add Back Depreciation 3,429,600 5,877,600 4,197,600 2,997,600 2,143,200 2,140,800
After Tax CF 27,171,840 28,151,040 27,479,040 26,999,040 26,657,280 26,656,320
After-Tax Salvage Value               6,085,440
Sale of Land               5,400,000
Net Cash Flow (29,300,000) 27,171,840 28,151,040 27,479,040 26,999,040 26,657,280             38,141,760

I need to calculate NPV at 9.24%. My Net cash flow is similar to many of the examples I viewed in Chegg but my NPV rate per year is incorrect when using Excel NPV. Please show me how to calculate percentage rate by year. Thanks

Homework Answers

Answer #1
Net Cash Flow $ -2,93,00,000 $   2,71,71,840 $ 2,81,51,040 $ 2,74,79,040 $ 2,69,99,040 $ 2,66,57,280 $ 3,81,41,760
PVIFA at 9.24% [PVIFA = 1/1.0924^n] 1 0.91542 0.83799 0.76711 0.70222 0.64282 0.58845
PV at 9.24% $   -2,93,00,000 $     2,48,73,526 $   2,35,90,169 $ 2,10,79,314 $ 1,89,59,268 $    1,71,35,918 $ 2,24,44,533
NPV $     9,87,82,729
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