Assigment # 02 FM

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Shrieves Casting Company Capital Budgeting Analysis

Equipment Cost 200,000 NPV 88,008.73


Shipping 10,000 IRR 0.24
Installation 30,000 240,000 MIRR 0.18
Economic Life 4 years
Salvage value 25,000
Depreciation schedule
Year 0 1 2 3
Depriciation amount 0 33.33% 44.45% 14.81%

Annual Unit Sales 1,250


Unit Sales Price 200
Inflation in sales price 3%
Unit cost 100
Inflation in unit cost 3%
Net Working capital 12%
Tax Rate 40%
wacc 10%

1) Calculate depriciation Amount and book value

Year 0 1 2 3
Annual Depriciation 79992.00 106680.00 35544.00
240,000 160008.00 53,328.00 17,784.00

2) Calculate total revenues and total cost

Year 0 1 2 3
units 1,250 1,250 1,250
Selling Price 200 206 212
Cost 100 103 106

Total Revenue 250,000 257500 265225


Total Cost 125000 128750 132612.5

3) Calculate Operating Cash Flow

Year 0 1 2 3

Total Revenue 250,000 257500 265225


Total Cost 125000 128750 132612.5
Depriciation 79,992 106680 35544
EBIT 450,080 22,070.00 97,068.50
Taxes 180032.00 8828.00 38827.4000
Operating Profit Aft Tax 270048 13242 58241.1

Net OCF 106,997 119,922.00 93,785.10

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