Question

evaluate the following project using the Net Present Value method.

year                              cash flow
0 investment                325,000
1 income                       90,000
2 add investment      20,000
3 income                     140,000
4 income                     125,000
discount rate                     9%

NPV ____________        Go or No Go ___________

compute operating cash flow using three of the four methods

Sales       400,000
Dep.        35,000
cost        250,000
Tax Rate        35%

Answer 1

1)

Year	Cash Flow	PV Factor	PV Of Cash Flow
a	b	c=1/1.09^a	d=b*c
0	$   -325,000	1	$       -325,000.00
1	$       90,000	0.917431	$           82,568.81
2	$     -20,000	0.84168	$         -16,833.60
3	$    140,000	0.772183	$        108,105.69
4	$    125,000	0.708425	$           88,553.15
	NPV		$         -62,605.95
Not to god with project because it has negative NPV.

2)

Sales	$         400,000
Less:
Depreciation	$            35,000
Cost	$         250,000
Income Before Tax	$         115,000
Less:
Tax At 35%	$            40,250
Net Income	$            74,750
Add: Depreciation	$            35,000
Operating Cash Flow	$         109,750