Buliding cost (=Depreciable basis) 12000

Equipment cost (=Depreciable basis) 8000

net operationg WC/sales 10%
first year sales in units 20000
growth rate in units sold 0.00%
sales price per unit 3
variable cost per unit 2.1
fixed cost 8000

Part 2 depreciation schedule 1 2

buliding depreciation rate 1.30% 2.60%
buliding depreciation 156 312
ending book val: cost-cum.dep 11844 11532

equipment dep rate 20.00% 32.00%

equipment dep 1600 2560
ending book value : cost-com. Dep 6400 3840

Buliding equipment
Estimated market value in 2009 7500 2000
book value in 2009 10908 1360
expected gain or loss -3408 640
taxes paid -1363.2 256
net cash flow from salvage 8863.2 1744

part4 projected net cash

flows (time line of annual cashflows) 0 1
2005 2006

buliding -12000
equipment -8000

operating cash flows over the projected life

units sold 20000
sales price 3
sales revenue 60000
variable costs 42000
fixed operating costs 8000
dep (building) 156
dep (equip) 1600
oper.income before taxes (EBIT) 8244
taxes on operating income (40%) 3297.6
net operating profit after taxes 4946.4
add back dep 1756
operating cash flows 6702.4
net operating working capital based on sales 6000 6180
cash flow due to investment -6000 -180

net salvage cash flow :buliding

net salvage cash flow :equip
total salvage cash flows

net cash flow (time line of cash flows) -26000 6522.4

NPV 7312.2062808302
 key output: NPV = 5809

Market value of buliding in 2009 7500

market value of equity in 2009 2000
tax rate 40%
WACC 12%
inflation: growth in sales price 3.00%
inflation: growth in VC per unit 2.00%
infaltion: growth in fixed costs 1.00%

3 4 Comm.Dep
2.60% 2.60%
312 312 1092
11220 10908

19.00% 12.00%
1520 960 6640
2320 1360

Total

10607.2

2 3 4
2007 2008 2009

20000 20000 20000

3.09 3.1827 3.278181
61800 63654 65563.62
42840 43696.8 44570.736
8080 8160.8 8242.408
312 312 312
2560 1520 960
8008 9964.4 11478.476
3203.2 3985.76 4591.3904
4804.8 5978.64 6887.0856
2872 1832 1272
7676.8 7810.64 8159.0856
6365.4 6556.362 0
-185.4 -190.962 6556.362

8863.2
1744
10607.2

7491.4 7619.678 25322.6476