Time CFO

0 ($18,325,000)
Sales due solely to the new product line are: $475,000,000
Increased sales of the motor home line occur because of the new product line introduction; $278,100,000
Erosion of luxury motor coach sales is also due to the new campers; $201,500,000
The net sales figure to use in evaluating the new line is thus: $551,600,000
Sales $515,000
Variable costs $185,400
Fixed costs $173,000
Depreciation $46,000
EBT $110,600
Taxes (21%) $23,226
Net income $87,374
Sales $704,600
Costs $527,300
Depreciation $82,100
EBIT $95,200
Taxes (22%) $20,944
Net income $74,256
OCF $156,356
Depreciation tax shield $18,062
Sales $215,000
Costs $104,000
Depreciation $25,300
EBIT $85,700
Taxes (23%) $19,711
Net income $65,989
OCF $91,289
OCF $91,289
OCF $91,289
OCF $91,289
 Property Class
Year Three-Year Five-Year Seven-Year
1 0.3333 0.2000 0.1429
2 0.4445 0.3200 0.2449
3 0.1481 0.1920 0.1749
4 0.0741 0.1152 0.1249
5 0.1152 0.0893
6 0.0576 0.0892
7 0.0893
8 0.0446
Year Beginning Book Value MACRS Depreciation Ending Book Value
1 $1,475,000.00 0.1429 $210,777.50 $1,264,222.50
2 $1,264,222.50 0.24 $361,227.50 $902,995.00
3 $902,995.00 0.17 $257,977.50 $645,017.50
4 $645,017.50 0.12 $184,227.50 $460,790.00
5 $460,790.00 0.09 $131,717.50 $329,072.50
6 $329,072.50 0.09 $131,570.00 $197,502.50
7 $197,502.50 0.09 $131,717.50 $65,785.00
8 $65,785.00 0.04 $65,785.00 $0.00
Annual depreciation $93,125.00
Accumulated depreciation $465,625.00
The book value at the end of Year 5 is: $279,375.00
Aftertax salvage value $165,319
BV_4 $984,960
Aftertax salvage value $1,628,842
 Tax
Year 0 Year 1 Year 2 Year 3 Required return
Sales $1,645,000 $1,645,000 $1,645,000
Costs $610,000 $610,000 $610,000
Depreciation $726,667 $726,667 $726,667
MACRS $726,594 $969,010 $322,858
Bonus 100% $457,800 $0 $0
EBIT $308,333 $308,333 $308,333
Taxes (21%) $64,750 $64,750 $64,750
Net income $243,583 $243,583 $243,583
NWC ($250,000) $250,000
Capital Spending $142,200
Capital Spending $176,123
OCF ($2,180,000) $970,250 $970,250 $970,250
OCF ($2,180,000) $1,275,450 $817,650 $817,650
CFO NET ($2,430,000) $970,250 $970,250 $1,362,450
CFO NET ($2,430,000) $970,235 $1,021,142 $1,311,573
CFO NET ($2,430,000) $1,275,450 $817,650 $1,209,850
NPV $150,376.79
NPV $179,537.00
NPV $183,881.12
NPV $221,767.55
21% 0.3333 0.4445 0.1481
12%
 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Pretax operating costs $135,000 $135,000 $135,000 $135,000 $135,000
Depreciation $77,000 $77,000 $77,000 $77,000 $77,000
Bonus 100% $80,850
NWC ($35,000) $35,000
Capital Spending $47,400
OCF ($385,000) $122,820 $122,820 $122,820 $122,820 $122,820
OCF ($385,000) $187,500 $106,650 $106,650 $106,650 $106,650
CFO NET ($420,000) $122,820 $122,820 $122,820 $122,820 $205,220
CFO NET ($420,000) $187,500 $106,650 $106,650 $106,650 $189,050
NPV $96,748.35
NPV $108,951.33
Tax 21%
Required return 10%
 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Pretax operating costs $165,000 $165,000 $165,000 $165,000 $165,000
Pretax operating costs $150,000 $150,000 $150,000 $150,000 $150,000
Pretax operating costs $100,000 $100,000 $100,000 $100,000 $100,000
Depreciation $107,000 $107,000 $107,000 $107,000 $107,000
NWC $60,000 ($60,000)
Capital Spending $22,800
OCF ($535,000) $151,080 $151,080 $151,080 $151,080 $151,080
OCF ($535,000) $139,680 $139,680 $139,680 $139,680 $139,680
OCF ($535,000) $101,680 $101,680 $101,680 $101,680 $101,680
CFO NET ($475,000) $151,080 $151,080 $151,080 $151,080 $113,880
CFO NET ($475,000) $139,680 $139,680 $139,680 $139,680 $102,480
CFO NET ($475,000) $101,680 $101,680 $101,680 $101,680 $64,480
IRR 16.18%
NPV $19,166.51
NPV ($121,277.58)
NPV $0.00
OCF $134,494.11
OCF $134,494.11
The cost savings $143,176.46
Tax 24%
Required return 11%
Cost of project ($345,000) Required return 11%
NWC ($25,000)
OCF ($41,000)
NPER 5 years
Depreciation $69,000
NPV ($506,695.49)
EAC ($137,096.76)
Techron I costs ($265,000) 3 years Tax 22%
The Techron II costs ($445,000) 5 years Salvage value $35,000
Pretax operating costs ($74,000) Discount rate 10%
Pretax operating costs ($47,000)
Techron I Depreciation $88,333.33
Techron II Depreciation $89,000.00
AfterTax salvage value $27,300
Techron I OCF ($38,286.67)
Techron II OCF ($17,080.00)
Techron I NPV ($339,702.38)
Techron II NPV ($492,795.49)
Techron I EAC ($136,599.36)
Techron II EAC ($129,998.21)
 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Sales
Variable costs
Fixed costs $850,000 $850,000 $850,000 $850,000 $850,000
Depreciation $188,000 $188,000 $188,000 $188,000 $188,000
NWC ($90,000) $90,000
Capital Spending $59,250
OCF ($940,000) $262,238.62 $262,238.62
CFO NET ($1,030,000)
NPV $0.00
Bid price $31.72
Tax 21%
Salvage value $75,000
Discount rate 12%
 Year 0 Year 1 Year 2 Year 3 Year 4
Pretax cost savings $160,000 $160,000 $160,000 $160,000
Depreciation $89,000 $142,400 $85,440 $51,264
Iventory ($20,000) ($2,800) ($2,800) ($2,800) $28,400
Capital Spending $48,117
OCF ($445,000) $144,380.00 $156,128.00 $143,596.80 $136,078.08
CFO NET ($465,000) $141,580 $153,328 $140,797 $212,595
NPV $53,271.78
Tax 22% 0.2000 0.3200 0.1920 0.1152
Salvage value $40,000
Required return 9%
 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Sales $348,000 $348,000 $348,000 $348,000 $348,000
Variable costs $121,800 $121,800 $121,800 $121,800 $121,800
Fixed costs $56,000 $56,000 $56,000 $56,000 $56,000
Depreciation $115,500 $0 $0 $0 $0
NWC ($40,000) $40,000
Capital Spending $27,300
OCF ($525,000) $248,256.00 $132,756.00 $132,756.00 $132,756.00 $132,756.00
CFO NET ($565,000) $248,256 $132,756 $132,756 $132,756 $200,056
NPV $101,078.23
Tax 22%
Salvage value $35,000
Discount rate 9%
System A ($295,000) Tax 21%
System B ($355,000) Discount rate 8%
Pretax annual operating costs_A ($77,000)
Pretax annual operating costs_B ($83,000)
Depreciation_A $73,750.00
Depreciation_B $59,166.67
OCF_A ($45,342.50)
OCF_B ($53,145.00)
NPV_A ($445,180.11)
NPV_B ($600,682.94)
EAC_A ($134,409.14)
EAC_B ($129,936.96)
 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Sales
Variable costs
Fixed costs $1,100,000 $1,100,000 $1,100,000 $1,100,000 $1,100,000
Depreciation $1,080,000 $1,080,000 $1,080,000 $1,080,000 $1,080,000
NWC ($450,000) ($40,000) ($40,000) ($40,000) ($40,000) $610,000
Capital Spending ($1,100,000) $1,300,000
Capital Spending $442,750
OCF ($5,400,000) $1,481,466.07 $1,481,466.07
CFO NET ($6,950,000)
NPV $0.00
Bid price $0.0299
Tax 23%
Salvage value $575,000
Discount rate 10%
 Machine A Machine B Tax 24%
Variable costs ($3,500,000.00) ($3,000,000.00) Discount rate 10%
Fixed costs ($315,000.00) ($355,000.00)
Depreciation ($350,000.00) ($533,333.33)
EBT ($4,165,000.00) ($3,888,333.33)
Tax ($999,600.00) ($933,200.00)
Net income ($3,165,400.00) ($2,955,133.33)
+ Depreciation $350,000.00 $533,333.33
OCF ($2,815,400.00) ($2,421,800.00)
NPV ($14,361,800.97) ($18,747,203.88)
EAC ($3,297,575.50) ($3,255,274.59)
Cost per year $3.63
PV of costs ($6.75)
EAC ($3.89)

Cost per year $0.4235

PV of costs ($6.48)
EAC ($0.65)

WPH 0.06
KPY 30
ECY $3.63

WPH 0.007
KPY 3.5
ECY $0.4235
 Year 0 Year 1 Year 2 Year 3 Year 4
Sales $2,262,000 $2,566,500 $2,827,500 $2,088,000
Variable costs $452,400 $513,300 $565,500 $417,600
Fixed costs $375,000 $375,000 $375,000 $375,000
Depreciation $949,905 $1,266,825 $422,085 $211,185
Depreciation $627,000 $0 $0 $0
NWC ($150,000) $150,000
Capital Spending $315,900
Capital Spending ($2,200,000) $2,400,000
Capital Spending ($275,000) $0
OCF ($2,850,000) $1,327,967.10 $1,587,697.50 $1,564,718.70 $1,056,872.70
OCF ($2,850,000) $1,745,988.00 $1,308,996.00 $1,471,860.00 $1,010,412.00
CFO NET ($5,200,000) $1,327,967 $1,587,698 $1,564,719 $3,922,773
CFO NET ($5,200,000) $1,745,988 $1,308,996 $1,471,860 $3,876,312
NPV $708,930.67
NPV $767,745.56
 1 5,200 Tax 22%
2 5,900 Salvage value $405,000
3 6,500 Discount rate 13%
4 4,800 Price per unit $435

0.3333
0.4445
0.1481
0.0741
 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Sales $29,110,000 $34,440,000 $42,230,000 $38,950,000 $26,240,000
Variable costs $20,235,000 $23,940,000 $29,355,000 $27,075,000 $18,240,000
Fixed costs $2,900,000 $2,900,000 $2,900,000 $2,900,000 $2,900,000
Depreciation $2,114,920 $3,624,520 $2,588,520 $1,848,520 $1,321,640
Bonus 100%
NWC ($2,300,000) ($799,500) ($1,168,500) $492,000 $1,906,500 $1,869,500
Capital Spending $3,031,795
OCF ($14,800,000) $5,164,383.20 $6,765,149.20 $8,423,839.20 $7,478,439.20 $4,306,544.40
CFO NET ($17,100,000) $4,364,883 $5,596,649 $8,915,839 $9,384,939 $9,207,839
NPV $4,910,413.48
IRR 28.39%
 1 71,000 Tax 21%
2 84,000 Salvage value $2,960,000
3 103,000 Discount rate 18%
4 95,000 Price per unit $410
5 64,000 Variable costs $285

0.1429
0.2449
0.1749
0.1249
0.0893
Cost of project ($905,000) Tax 22% 0.3333
NWC $65,000 Salvage value $125,000 0.4445
Aftertax salvage value $97,500 Discount rate 9% 0.1481
Total cost ($970,000) 0.0741
NPV ($0.00)
Required Savings $229,338.33
301,636.50
402,272.50
134,030.50
67,060.50
 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Sales $3,630,000 $3,630,000 $3,630,000 $3,630,000$3,630,000
Variable costs $2,357,300 $2,357,300 $2,357,300 $2,357,300$2,357,300
Fixed costs $850,000 $850,000 $850,000 $850,000 $850,000
Depreciation $188,000 $188,000 $188,000 $188,000 $188,000
NWC ($90,000) $90,000
Capital Spending $59,250
OCF ($940,000) $373,413.00 $373,413.00 $373,413.00 $373,413.00 $373,413.00
CFO NET ($1,030,000) $373,413 $373,413 $373,413 $373,413 $522,663
NPV $400,758.75
NPV $0.00
OCF $262,238.62
OCF $262,238.62
Quantity break even 97,837 units
OCF $262,238.62
FC break even $990,727.06
Tax 21%
Salvage value $75,000
Discount rate 12%
 Year 0 Year 1 Year 2 Year 3 Year 4 1 12,300
Sales 2 14,600
Sales on Spot market $2,214,000 $2,628,000 $3,456,000 $2,088,000 3 19,200
Variable costs 4 11,600
Variable costs Spot $1,045,500 $1,241,000 $1,632,000 $986,000
Fixed costs $595,000 $595,000 $595,000 $595,000
Depreciation $850,000 $850,000 $850,000 $850,000
NWC ($395,000) $395,000
Capital Spending $250,250
OCF $899,745 $1,067,990 $1,404,480 $848,540
OCF ($3,400,000) $37,518.42 $37,518.42
CFO NET ($3,795,000)
NPV $3,335,357.21
NPV $100,000
Bid price $162.97
Tax 23%
Salvage value $325,000
Discount rate 10%
Spot Price per unit $180
Variable costs $85
Costs old computer ($1,400,000) Tax 22%
Costs new computer ($1,700,000) Discount rate 12%
Depreciation_old $281,000 3 years
Depreciation_new $340,000 5 years
Salvage value_new $325,000.00
Salvage value_inTwoYearsOLD $130,000
Salvage value_nowOLD $450,000
Save Operating costs_new $315,000
OCF_new $320,500
Aftertax salvage value_new $253,500
NPV_new ($400,826.52)
EAC_new ($111,193.18)
OCF_old $61,820
Aftertax salvage value_nowOLD $536,460.00
Aftertax salvage value_inTwoYearsOLD $163,220
NPV_old ($301,863.06)
EAC_old ($178,611.80)

t New computer Old computer Difference

0 ($1,700,000) ($536,460.00) ($1,163,540.00)
1 320,500 61,820 $258,680.00
2 320,500 225,040 $95,460.00
3 320,500 0 $320,500.00
4 320,500 0 $320,500.00
5 574,000 0 $574,000.00
NPV -98,963.46
 Year 0 Year 1 Year 2 Year 3 Year 4
Total change in sales $65,950,000 $77,700,000
New Sales $92,000,000 $97,750,000 $74,750,000 $60,375,000
Lost sales ($13,050,000) ($13,050,000)
Lost revenue ($13,000,000) ($7,000,000)
Net sales $65,950,000 $77,700,000 $74,750,000 $60,375,000
VC_new $39,200,000 $41,650,000 $31,850,000 $25,725,000
Lost sales ($4,650,000) ($4,650,000)
Net VC $34,550,000 $37,000,000 $31,850,000 $25,725,000
FC $6,900,000 $6,900,000 $6,900,000 $6,900,000
Depreciation $7,073,550 $12,122,550 $8,657,550 $6,182,550
NWC ($13,190,000) ($2,350,000) $590,000 $2,875,000
Capital Spending
OCF ($49,500,000) $20,840,446 $29,247,736 $30,258,086 $23,220,836
CFO NET ($49,500,000) $7,650,446 $26,897,736 $30,848,086 $26,095,836
Payback period 2.48
Discounted Payback period 2.97
PI 1.76
IRR 34.42%
NPV $37,798,666.04
 Q(new) Q(old)
Year 5 1 160,000 95,000 Tax 21%
2 170,000 65,000 Salvage value $6,800,000
$46,000,000 3 130,000 Discount rate 12%
4 105,000 The cost of the new equipment ($49,500,000)
5 80,000 The lost sales 30000
$46,000,000 Price old smart phone $435
$19,600,000 0.1429 Price new smart phone $575
0.2449 NPER 5
$19,600,000 0.1749 Salvage value $6,800,000
$6,900,000 0.1249 VC (old) $155
$4,420,350 0.0893 FC(old) $4,300,000
$12,075,000 Price old smart phone $235
$7,691,125 NWC 20%
$16,333,274 VC (new) $245
$36,099,398 FC(new) $6,900,000
units of the old smart phone each year for two years
per unit
units

the value of the equipment in five years

units will have to be lowered to each

of sales