Question No.

NPV of Project A NPV of Project B NPV of Project C NPV (A+B+C)

1
120 -40 40 120

C0 C1 C2 IRR
2
-800 5000 -5000 400%

3 One Sign change in the cashflow

Project Co C1 C2
A -6500 2500 2500
4
B -1800 0 1000
C -5100 2500 3400

5 Sunk Costs

Book Value Worth Tax Tax amount

6
300000 500000 0.35 70000

Change in Inventory Change in AR Change in AP Change in NWC

7
6000 4000 3000 7000

Depreciation Tax Tax Shield

8
600000 0.35 210000

Sales per year (Real) Costs per year (Real) Tax Real Rate
9
1000 500 0.3 0.1

2010 2011 2012

AR 0 184000 259000
Inventory 92000 147000 147000
10 AP 33500 58500 67000

NWC 58500 272500 339000

Cash Flow -58500 -214000 -66500

Machine C0 C1 C2
11
 A -103000 113000 124000
11
B -123000 113000 124000
COC= 0.09

New Kiln Installation Cost Tax COC

400000 50000 0.35 0.05
MACRS Depreciation Dep
Year 1 0.2 50000 10000
12 Year 2 0.32 50000 16000
Year 3 0.192 50000 9600
Year 4 0.1152 50000 5760
Year 5 0.1152 50000 5760
Year 6 0.0576 50000 2880

Cost Energy Cost per year No. of years

Low Energy Lightbulb 3.7 1.8 9
13
Conventional Lightbulb 0.54 6.8 1
Discount rate 0.05
 Answers
Inputs from questions

(Calculates one of the IRR's)

C3 C4 Rate NPV
2500 0 10% ($282.87)
3500 4500 $4,729.61
4500 6500 $7,803.15

Opportunity Cost
430000

Project Cost NPV

3000 500

2013 2014
224000 0
112000 0
43500 0

292500 0
46500 292500

C3 NPV EAC
 0 $105,038.04 $59,710.86
136000 $190,055.00 $75,082.13

Tax Shield 1 Tax Shield 2

16666.6666666667 $15,305.53
Tax Shield
3500
5600
3360
2016
2016
1008

NPV of Energy costs Total Cost EAC

12.7940790162 16.4940790162 $2.32
6.4761904762 7.0161904762 $7.37