Year 0 1 2

Track
Depreciation 7,000.00 1,000.30 1,714.30
MACRS rate 14.29% 24.49%

Locomotive
Depreciation 1,200.00 120.00 216.00
MACRS rate 10.00% 18.00%

Drivers as a Percent of Revenue

Maintenance 8% 8%
Transportation expenses 28% 28%
Net working capital 10% 10%

Inflation rate 3% 3%
Carload growth rate 0% 0%
Maintenance (fixed) 500.00 515.00
Tax rate 35% 35%
Revenue per car 0.80 0.82
Carloads per year 4,000.00 4,000.00

Independent Working

Total Revenue 3200.00 3296.00

Variable Maintenance 256 263.68
Fixed Maintenance 500.00 515.00
Total Maintenance (Variable and Fixed) 756.00 778.68
Transportation Expenses 896.00 922.88
 3 4 5 6 7 8

1,224.30 874.30 625.10 624.40 625.10 312.20

17.49% 12.49% 8.93% 8.92% 8.93% 4.46%

172.80 138.24 110.64 88.44 78.60 78.60

14.40% 11.52% 9.22% 7.37% 6.55% 6.55%

8% 8% 8% 8% 8% 8%
28% 28% 28% 28% 28% 28%
10% 10% 10% 10% 10% 10%

3% 3% 3% 3% 3% 3%
0% 0% 0% 0% 0% 0%
530.45 546.36 562.75 579.64 597.03 614.94
35% 35% 35% 35% 35% 35%
0.85 0.87 0.90 0.93 0.96 0.98
4,000.00 4,000.00 4,000.00 4,000.00 4,000.00 4,000.00

3394.88 3496.73 3601.63 3709.68 3820.97 3935.60

271.5904 279.738112 288.13025536 296.7741630208 305.6773879114 314.84770955
530.45 546.36 562.75 579.64 597.03 614.94
802.04 826.10 850.88 876.41 902.70 929.78
950.57 979.08 1008.46 1038.71 1069.87 1101.97
 9 10

78.72 78.60
6.56% 6.55%

8% 8%
28% 28%
10% 10%

3% 3%
0% 0%
633.39 652.39
35% 35%
1.01 1.04
4,000.00 4,000.00

4053.66 4175.27
324.293140835 334.02193506
633.39 652.39
957.68 986.41
1135.03 1169.08
 Year 0 1
Revenue 3200.00
- Maintenance 756.00
- Transportation expenses 896.00
- Depreciation 1120.30
EBIT 427.70
- Taxes 149.70
Net income 278.01

Operating Cash Flows 1398.31

Net Capital Spending -8200.00

(1) Track
Cost -7000.00 1000.30
Proceed from sales
Taxes 35%
After-tax salvage

(2) Locomotive
Cost -1200.00 120
Proceed from sales 200
Taxes 35%
After-tax salvage

Total Net Capital Spending -8200.00

Net Working Capital 100.00 320.00

ΔNWC 220.00

Free Cash Flow -8300.00 1178.31

NPV 500.76
IRR 11.49%

Hence, we recommend that the project is feasible

and can be invested in. The NPV is positive and the
IRR is more than the required rate of return.
2 3 4 5 6
3296.00 3394.88 3496.73 3601.63 3709.68
778.68 802.04 826.10 850.88 876.41
922.88 950.57 979.08 1008.46 1038.71
1930.30 1397.10 1012.54 735.74 712.84
-335.86 245.17 679.00 1006.55 1081.72
0.00 85.81 237.65 352.29 378.60
-335.86 159.36 441.35 654.26 703.12

1594.44 1556.46 1453.89 1390.00 1415.96

1714.30 1224.30 874.30 625.10 624.40

216 172.8 138.24 110.64 88.44

329.60 339.49 349.67 360.16 370.97

9.60 9.89 10.18 10.49 10.80

1584.84 1546.57 1443.71 1379.51 1405.15

7 8 9 10
3820.97 3935.60 4053.66 4175.27
902.70 929.78 957.68 986.41
1069.87 1101.97 1135.03 1169.08
703.70 390.80 78.72 78.60
1144.69 1513.04 1882.24 1941.19
400.64 529.57 658.78 679.42
744.05 983.48 1223.46 1261.77

1447.75 1374.28 1302.18 1340.37

625.10 312.20 0.00 0.00

78.6 78.6 78.72 78.6

160.64
56.22
104.42

104.42

382.10 393.56 405.37 -100.00

11.13 11.46 11.81 -505.37

1436.62 1362.82 1290.37 1950.16