In: Accounting
New hog investment | ||||||||||||
NPV | Y0 | Y1 | Y2 | Y3 | Y4 | Y5 | Y6 | Y7 | Total | Calculation of straight line depreciation | ||
Investment | (130,000.00) | - | - | - | - | - | - | - | (130,000.00) | |||
Operating Expenses | (23,000.00) | (23,000.00) | (23,000.00) | (23,000.00) | (23,000.00) | (23,000.00) | (23,000.00) | (161,000.00) | Purchase cost | 130,000.00 | ||
Depreciation | (18,571.43) | (18,571.43) | (18,571.43) | (18,571.43) | (18,571.43) | (18,571.43) | (18,571.43) | (130,000.00) | Life (Years) | 7.00 | ||
Savings in costs | 87,000.00 | 87,000.00 | 87,000.00 | 87,000.00 | 87,000.00 | 87,000.00 | 87,000.00 | 609,000.00 | Annual Depreciation | 18,571.43 | ||
Net Savings | 45,428.57 | 45,428.57 | 45,428.57 | 45,428.57 | 45,428.57 | 45,428.57 | 45,428.57 | 318,000.00 | ||||
Tax @ 30% | 13,628.57 | 13,628.57 | 13,628.57 | 13,628.57 | 13,628.57 | 13,628.57 | 13,628.57 | 95,400.00 | ||||
Savings after tax | 31,800.00 | 31,800.00 | 31,800.00 | 31,800.00 | 31,800.00 | 31,800.00 | 31,800.00 | 222,600.00 | ||||
Add: Depreciation | 18,571.43 | 18,571.43 | 18,571.43 | 18,571.43 | 18,571.43 | 18,571.43 | 18,571.43 | 130,000.00 | ||||
Add: Salvage Value | - | - | - | - | - | - | 45,000.00 | 45,000.00 | ||||
Net Cash flows | (130,000.00) | 50,371.43 | 50,371.43 | 50,371.43 | 50,371.43 | 50,371.43 | 50,371.43 | 95,371.43 | 267,600.00 | |||
PV factor @ 13.5% | 1.00 | 0.881 | 0.776 | 0.684 | 0.603 | 0.531 | 0.468 | 0.412 | ||||
PV of cash flows | (130,000.00) | 44,380.11 | 39,101.42 | 34,450.59 | 30,352.94 | 26,742.68 | 23,561.83 | 39,304.95 | 107,894.54 | |||
Net present value (NPV) is $ 107,894.54 |
IRR | Y0 | Y1 | Y2 | Y3 | Y4 | Y5 | Y6 | Y7 | Total |
Investment | (130,000.00) | - | - | - | - | - | - | - | (130,000.00) |
Operating Expenses | (23,000.00) | (23,000.00) | (23,000.00) | (23,000.00) | (23,000.00) | (23,000.00) | (23,000.00) | (161,000.00) | |
Depreciation | (18,571.43) | (18,571.43) | (18,571.43) | (18,571.43) | (18,571.43) | (18,571.43) | (18,571.43) | (130,000.00) | |
Savings in costs | 87,000.00 | 87,000.00 | 87,000.00 | 87,000.00 | 87,000.00 | 87,000.00 | 87,000.00 | 609,000.00 | |
Net Savings | 45,428.57 | 45,428.57 | 45,428.57 | 45,428.57 | 45,428.57 | 45,428.57 | 45,428.57 | 318,000.00 | |
Tax @ 30% | 13,628.57 | 13,628.57 | 13,628.57 | 13,628.57 | 13,628.57 | 13,628.57 | 13,628.57 | 95,400.00 | |
Savings after tax | 31,800.00 | 31,800.00 | 31,800.00 | 31,800.00 | 31,800.00 | 31,800.00 | 31,800.00 | 222,600.00 | |
Add: Depreciation | 18,571.43 | 18,571.43 | 18,571.43 | 18,571.43 | 18,571.43 | 18,571.43 | 18,571.43 | 130,000.00 | |
Add: Salvage Value | - | - | - | - | - | - | 45,000.00 | 45,000.00 | |
Net Cash flows | (130,000.00) | 50,371.43 | 50,371.43 | 50,371.43 | 50,371.43 | 50,371.43 | 50,371.43 | 95,371.43 | 267,600.00 |
PV factor @ 35% | 1.00 | 0.741 | 0.549 | 0.406 | 0.301 | 0.223 | 0.165 | 0.122 | |
PV of cash flows | (130,000.00) | 37,312.17 | 27,638.64 | 20,473.07 | 15,165.24 | 11,233.51 | 8,321.12 | 11,670.30 | 1,814.04 |
IRR is 35% |
As NPV is positive so you should invest in this project. |