TABLE 4 You are considering a new product launch: Equipment for the project will cost $875,000 The project will have a four-year life, and have no salvage value. Depreciation is straight-line to zero over the four years. The required retum on the project is 11%, and the tax rate is 35%. Projected annual sales and cost figures are shown below (sales and costs are estimated to be ident: Based on the information given, calculate OCF and NPV Equipment cost Project length (years) Required return Tax rate $875,000 4 11% 35% Annual Sales Annual Variable costs Annual Fixed costs Annual Depreciation Annual EBIT Annual Taxes $3,948,000 $2,869,000 $345,000 Annual OCF Cash flows YEAR 2 PROJECT NPV you MUST use NPV fi

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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7:12 1
TABLE 4
You are considering a new product launch:
Equipment for the project will cost $875,000
The project will have a four-year life, and have no salvage value.
Depreciation is straight-line to zero over the four years.
The required retum on the project is 11%, and the tax rate is 35%.
Projected annual sales and cost figures are shown below (sales and costs are estimated to be identical for each year 1-4)
Based on the information given, calculate OCF and NPV
Equipment cost
Project length (years)
Required return
Tax rate
$875,000
4
11%
35%
Annual Sales
Annual Variable costs
$3,948,000
$2,869,000
$345,000
Annual Fixed costs
Annual Depreciation
Annual EBIT
Annual Taxes
Annual OCF
Cash flows
YEAR
of
2
3
4
PROJECT NPV
you MUST use NPV function in excel
Transcribed Image Text:7:12 1 TABLE 4 You are considering a new product launch: Equipment for the project will cost $875,000 The project will have a four-year life, and have no salvage value. Depreciation is straight-line to zero over the four years. The required retum on the project is 11%, and the tax rate is 35%. Projected annual sales and cost figures are shown below (sales and costs are estimated to be identical for each year 1-4) Based on the information given, calculate OCF and NPV Equipment cost Project length (years) Required return Tax rate $875,000 4 11% 35% Annual Sales Annual Variable costs $3,948,000 $2,869,000 $345,000 Annual Fixed costs Annual Depreciation Annual EBIT Annual Taxes Annual OCF Cash flows YEAR of 2 3 4 PROJECT NPV you MUST use NPV function in excel
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