Question

In: Finance

Recalculate cash flow as shown from above table if variable costs are 83 percent of sales. Confirm that NPV will be - $788,000.



Year 0

Years 1-12

Investment

- $5,400,000


  1. Sales


$ 16,000,000

  1. Variable costs


13,000,000

  1. Fixed costs


2,000,000

  1. Depreciation


450,000

  1. Pre-tax profit (1 – 2 – 3 – 4)


550,000

  1. Taxes (at 40%)


220,000

  1. Profit after tax


330,000

  1. Cash flow from operations (4 + 7)


780,000

Net cash flow

-$5,400,000

$       780,000

Recalculate cash flow as shown from above table if variable costs are 83 percent of sales. Confirm that NPV will be - $788,000.

Solutions

Expert Solution

EXCEL FORMULA:

Note: For calculating NPV discount rate is required.

jeff jeffy answered 3 years ago
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