Fin 370 Week 4 Calculating Cash Flow Problem Set

FIN 370 Week 4 Calculating Cash Flow problem set

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Data:

Cost of Capital (borrowing)

Cost of Automobile

Cost of additional equiment atached to tu

Tax rate

Annual Before Tax Cash flows

→

Project

12.00%

$200,000

$15,000

35%

Year-1

Year-2

Year-3

Year-4

Year-5

Year-6

Year-7

Year-8

$70,000

Process Area:

Cash Outflows

Cost of Equipment

Total Investment Outlays

$65,000

$60,000

$55,000

$50,000

$40,000

20.0%

Depreciaiton Rate (MACRS)

$70,000

Given in problem

Given in problem

Given in problem

Given in problem

$30,000 Given in problem

32.0%

19.2%

11.5%

11.5%

5.8%

0.0%

0.0% Given in problem

Year – 0

$215,000

$215,000

Cash Inflows:

Net Operating Cash flows

Depreciation

Earnings before interest and taxes

Taxes

Earning after taxes

Add Depreciation

Net Operating Cash flows

Year-0

Given in problem

Given in problem

Year-1

Year-2

Year-3

Year-4

Year-5

Year-6

Year-7

Year-8

Take cash flows from years 0-8 (including initial outlay)

Initial investment X depreciation rate

Cash flows minus depreciation

Earnings X tax rate

Earnings before taxes minus taxes

Add depreciation from line 21

Earning after taxes + depreciation

Pay Back Period

0

0

0

0

0

0

0

0

0

Pay Back Period divided by Net Operating Cash Flows

Discounted Operating Cash flows

Decision Criteria:

Pay Back Period

Discounted Pay Back Period

Net Present Value

Internal Rate of Return

Profitability Index

0

0

>8 Years

>8 Years

0

0

#DIV/0!

Years

Years

$0.00 = Reject

Err:523

Err:523

#DIV/0!

#DIV/0!

0

0

#DIV/0!

0

0

#DIV/0!

0

0

#DIV/0!

0

0

#DIV/0!

0

0

#DIV/0!

0

0

#DIV/0!

0

0

#DIV/0!