Lay out the cash flows for years 1-5

Finance

You will complete a capital budgeting Excel spreadsheet solution based on:

  • Cost of new equipment                                             $14,800,000
  • Shipping and installation                                                  200,000
  • Unit sales
    • Year 1           70,000
    • Year 2          120,000
    • Year 3          120,000
    • Year 4            80,000
    • Year 5            70,000
  • Sales price  = $300 / unit in years 1-4 and $250/unit in year 5
  • Variable cost = $140 / unit
  • Fixed cost = $700,000 per year for all 5 years
  • Working capital : $200,000 at start of project, recovered at end
  • Depreciation = straight line over 5 years
  • Tax rate = 34%
  • Cost of capital = 15%

You must complete this project using an Excel spreadsheet. Your assignment specifically:

  1. Lay out the cash flows for years 1-5
  2. Calculate the project NPV, using the Excel NPV function (write the function on your submitted spreadsheet)
  3. Calculate the project IRR, using the Excel NPV function (write the function on your submitted spreadsheet)

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