Create the following tables for your project and calculate the NPV: Annual depreciation and the ending...

Create the following tables for your project and calculate the NPV:

Annual depreciation and the ending book value each year using the 5-year MACRS schedule.
Pro Forma income statements for years 1 – 3
Project cash flows for years 1 – 3 including: Operating Cash Flow, change in Net Working Capital, Net Capital Spending and Total Cash Flow from Assets.
Calculate Net Present Value and decide whether the company should go forward with the project.

You are evaluating a project for ‘The Ultimate’ recreational tennis racket, guaranteed to correct a wimpy backhand. You estimate the sales price of ‘The Ultimate’ to be $400 and sales volume to be 1,000 units the 1^st year, 1,250 units the 2^ndyear and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires $165,000 of equipment that is depreciated using the 5-year MACRS schedule. The actual market value of the equipment at the end of year 3 is $35,000. Initial net working capital investment is $75,000 and NWC will maintain a level equal to 20% of sales for the first two years. There is no increase in year 3 of the project. The tax rate is 34% and the required return on the project is 10%.

What is the NPV of this project? (Show all your calculations)

Expert Solution

jeff jeffy answered 6 months ago

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