Question

Delia Landscaping is considering a new 4-year project. The necessary fixed assets will cost $189,000 and be depreciated on a 3-year MACRS and have no salvage value. The MACRS percentages each year are 33.33 percent, 44.45 percent, 14.81 percent, and 7.41 percent, respectively. The project will have annual sales of $126,000, variable costs of $33,700, and fixed costs of $12,700. The project will also require net working capital of $3,300 that will be returned at the end of the project. The company has a tax rate of 35 percent and the project's required return is 9 percent. What is the net present value of this project?

Answer 1

		A	B	C	D	E
1	Year	0	1	2	3	4
2	Fixed assets cost	189000
3	Net Working Capital	3300
4	Annual Sales		126000	126000	126000	126000
5	Variable Costs		33700	33700	33700	33700
6	Fixed Costs		12700	12700	12700	12700
7	Depreciation Rate		33.33%	44.45%	14.81%	7.41%
8	Depreciation = Dep rate * Fixed Asset cost		62993.70	84010.50	27990.90	14004.90
9	EBIT= Annual Sales-Variable Costs- Fixed Costs- Depreciation		16606.30	-4410.50	51609.10	65595.10
10	Tax = EBIT*Tax rate		5812.205	-1543.675	18063.19	22958.29
11	EAT = EBIT - Tax		10794.10	-2866.83	33545.92	42636.82
12	Add depereciation		62993.70	84010.50	27990.90	14004.90
13	Add net working capital					3300
14	FCFF	-192300	73787.80	81143.68	61536.82	59941.72
15	Rate	9%
	NPV	$33,674.17	Using Excel formula = NPV(A15,B14:E14)+A14

Best of Luck. God Bless
Please Rate Well