Year 0 10 20 Action Establish trees Forest health thinning Harvest of timber Cash Flow ($25,000) ($5,450) $90,000 6%

k algo 10-31 Cash Flows And NPV The Bruin's Den Outdoor Gear is considering a new 6-year project to produce a new tent line. The equipment necessary would cost $1.29 million and be depreciated using straight-line depreciation to a book value of zero. At the end of the project, the equipment can be sold for 15 percent of its initial cost. The company believes that it can sell 23,500 tents per year at a price of $64 and variable costs of $25 per tent. The fixed costs will be $395,000 per year. The project will require an initial investment in net working capital of $193,000 that will be recovered at the end of the project. The required rate of return is 10.7 percent and the tax rate is 21 percent. What is the NPV?

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B C D E F G H 1 Problem 9-6 Internal Rate of Return and Taxes-See Textbook page 9-30 2 The Boston Culinary Institute is evaluating a classroom remodeling project. The cost of the remodel will be 3 $350,000 and will be depreciated over six years using the straight-line method. The remodeled room will 4 accommodate five extra students per year. Additional information relating to the project follows: 5 10 11 12 13 14 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 15 Required 16 Assuming a six-year time horizon, what is the internal rate of return of the remodeling project? Calculate 17 using both present value factors and separately using Excel's IRR function 18 19 39 40 Cost of the remodel project Useful life of project in years Annual number of extra accommodated students Annual tuition per student 41 42 43 Before-tax incremental cost of a student Company's income tax rate Required rate of retur Annual cash flow Revenue Less costs: Other than depreciation Depreciation…