Calculate the net present value (NPV) of the investment using your answers from Q2-Q4 and Q6....

Calculate the net present value (NPV) of the investment using your answers from Q2-Q4 and Q6.

I need to also have the formula in my excel answer so I will need to be walked through the formula to use with which numbers to plug in.

Purchase Price	-$449,900.00
Initial Cost	-$11,468.00
Investment in NWC	-$3,220.00
After-Tax SV
Initial Outlay	-$464,588.00

Project Life	10	Tax Rate
		Rate for Single Earning $207,350 a year
Initial Outlay from Q2	-$464,588.00	35.00%

Annual Operating Cash Flow	(Sales-Cost) x (1-tax rate) + (depreciation) x (tax rate)
Annual Rent	$19,320.00
Expenses	$16,321.15
Depreciation	$16,360.00
Taxes Rate	0.35
Annual Operating Cash Flow (Year 1 - 10)	$7,675.25

Question 4	(0.5 point). Calculate the terminal cash flow in yr 10 your answers from Q1.

After Tax Savage Value	SV - t*(SV - BV)
Savage Value	$494,900.00
Tax Rate	35.00%

Accumulated Depreciation
Depreciation Expense	$16,360.00
# of Years of Project	10
Accumulated Depreciation Total	$163,600.00

BV
Depreciable Asset (Purchase Price+Inital Cost)	-$461,368.00
Accumulated Depreciation	$163,600.00
BV Total	-$624,968.00

After Tax Savage Value	$102,946.20

Terminal Cash Flow
Recovery of NMW from Q2	$3,220.00
After-Tax Savage Value	$102,946.20
Terminal CF	$106,166.20




Year	Amount
0	-$464,588
1	$7,675.25
2	$7,675.25
3	$7,675.25
4	$7,675.25
5	$7,675.25
6	$7,675.25
7	$7,675.25
8	$7,675.25
9	$7,675.25
10	$113,841.45

WACC =	Wd Rd (1-T) + We Re

Wd =	Weight on debt securities
Rd =	Cost of Debt (=borrowing rate)
T	Corporate Tax Rate
We =	Weight on equity securities
Re =	Cost of Equity (=expected Return)


Wd =	70%
Rd =	3.82%
T	35%
We =	30%
Re =	7%

WACC

Expert Solution

WACC = Wd *Rd(1-t) + We * Re

= 0.7 * 3.82 (1-0.35) + 0.3 * 7

= 3.8381%

Computation of NPV

Year	Cash outflow (A)	Annual operating cash flow (B)	Terminal cash flow (C)	Total cash flows (D)=(A)+(B)+(C)	PVF @ 3.8381% (E)	Present value of cash flows (D)*(E)
0	(464,588)	-	-	(464,588.00)	1	(464,588.00)
1	-	7,675.25	-	7,675.25	0.9630	7,391.55
2	-	7,675.25	-	7,675.25	0.9274	7,118.35
3	-	7,675.25	-	7,675.25	0.8932	6,855.23
4	-	7,675.25	-	7,675.25	0.8601	6,601.85
5	-	7,675.25	-	7,675.25	0.8284	6,357.83
6	-	7,675.25	-	7,675.25	0.7977	6,122.83
7		7,675.25	-	7,675.25	0.7683	5,896.51
8		7,675.25	-	7,675.25	0.7399	5,678.57
9		7,675.25	-	7,675.25	0.7125	5,468.67
10		7,675.25	106,166.2	113,841.45	0.6862	78,114.76
Net present value	(328,981.85)

Hence, net present value of the investment is -$328,981.85

jeff jeffy answered 3 years ago

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