Contract 600,000

Price $34
Production Year 1 650,000
Production Year 2 725,000
Production Year 3 810,000
Production Year 4 740,000
Variable Cost $13
Fixed Cost $2,500,000
spot rate $40
Networking Cap 5% of sales
Tax 38%

Year 1 Year 2 Year 3 Year 4

Contract $20,400,000 $20,400,000 $20,400,000 $20,400,000
Spot $2,000,000 $5,000,000 $8,400,000 $5,600,000
Total $22,400,000 $25,400,000 $28,800,000 $26,000,000

The current after tax value ofthe land is an apportunity cost. The initial outlay for net working capital is the
percentage required net working capital times year 1 sales, or:

Initial net working capital = $1,120,000

So, the cash flow today is:

Equipment -$30,000,000
Land -$5,000,000
NWC -$1,120,000
Total -$36,120,000

Now we can calculate the OFC each year. The OFC is:

Year 1 Year 2 Year 3 Year 4 Year 5

Sales $22,400,000 $25,400,000 $28,800,000 $26,000,000
VC $8,450,000 $9,425,000 $10,530,000 $9,620,000
FC $2,500,000 $2,500,000 $2,500,000 $2,500,000 $4,000,000
Dep $4,290,000 $7,350,000 $5,250,000 $3,750,000
EBT $7,160,000 $6,125,000 $10,520,000 $10,130,000 -$4,000,000
Tax $2,720,800 $2,327,500 $3,997,600 $3,849,400 $1,520,000
NI $4,439,200 $3,797,500 $6,522,400 $6,280,600 -$2,480,000
+ Dep $4,290,000 $7,350,000 $5,250,000 $3,750,000
OCF $8,729,200 $11,147,500 $11,772,400 $10,030,600 -$2,480,000

NWC requirement each year, NWC is 5 percent of next year’s sales.

year 1 year 2 year 3 year 4

Beg. NWC $1,120,000 $1,270,000 $1,440,000 $1,300,000
End. NWC $1,270,000 $1,440,000 $1,300,000
NWC CF -$150,000 -$170,000 $140,000 $1,300,000

BV equipment $9,360,000
Market value eq. $18,000,000
Tax on sale of eq. -$3,283,200

Aftertax salvage value $14,716,800

year 0 year 1 year 2 year 3 year 4

Net cash flow -$36,120,000 $8,729,200 $11,147,500 $11,772,400 $10,030,600

Payback period 3.4457260782 Total year 1-3 (year 1-3) - year 0 sisa tahun
$31,649,100 $4,470,900 0.44572608

year 1 year 2 year 3 year 4 year 5

Profitability Index $7,793,929 $8,886,719 $8,379,362 $6,374,628 -$1,407,219

Average Net income / Average Investment

AAR 0.179334818

IRR -1%

MIRR 265%

NPV -1393476.879
rking capital is the

Year 6 Total
$102,600,000
$38,025,000
$6,000,000 $20,000,000
$20,640,000 (Tabel 7.3 hlmn 202)
-$6,000,000 $23,935,000
$2,280,000 $16,695,300
-$3,720,000 $14,839,700
$20,640,000
-$3,720,000 $35,479,700
year 5 year 6
-$2,480,000 -$3,720,000

year 6 Total PV of CF subsequent to initial invest / Initial invest

-$1,884,668 $28,142,750 0.7791