Analysis of the Initial Outlays (at Year 0)

New Asset
Purchase Price 350,000.00
Shipping Cost 50,000.00
Installed cost of New Asset 400,000.00

Old Asset
Sale Price 20,000.00
Tax on (Gain)/Loss 30% 6,000.00
After-tax Proceed from the sale of old asset 14,000.00

(Increase)/Decrease on NOWC 20,000.00

Initial Cash Flow (366,000.00)

Analysis of the Operating Cash Flows

New Asset
1
Projected Revenues (10% Growth) 10% 800,000.00
COGS (50% of Revenues) 50% 400,000.00
Gross Profit 400,000.00
Fixed Operating Expenses 50,000.00
Diesel Fuel 150,000.00
Fleet Maintenance 10,000.00
Fleet Depreciation 72,000.00
Earnings Before Interest and Tax 118,000.00
Taxes (30% of EBIT) 30%
NOPAT
Add Back Depreciation
OCF

Old Asset (an opportunity cost concept)

1
Projected Revenues (10% Growth) 10%
COGS (50% of Revenues) 50%
Gross Profit
Fixed Operating Expenses
Diesel Fuel
Fleet Maintenance
Fleet Depreciation
Earnings Before Interest and Tax
Taxes (30% of EBIT) 30%
NOPAT
Add Back Depreciation
OCF

Incremental Operating Cash Flows

1
OCF generated by new asset
OCF generated by old asset
Incremental OCF

Analysis of the Terminal Cash Flow (at Year 5)

New Asset
Sale Price
Tax on (Gain)/Loss 30%
After-tax Proceed from the sale of new asset

Old Asset
Sale Price
Tax on (Gain)/Loss 30%
After-tax Proceed from the sale of old asset
Opportunity Cost of the Old Asset

(Increase)/Decrease on NOWC

Initial Cash Flow

Replacement Free Cash Flow

0
OCF
Less Increase in Capex
Less Increase in NOWC
FCF

Discount Rate 15.00%

Net Present Value

 2 3 4 5
880,000.00 968,000.00 1,064,800.00 1,171,280.00
440,000.00 484,000.00 532,400.00 585,640.00
440,000.00 484,000.00 532,400.00 585,640.00
50,000.00 50,000.00 50,000.00 50,000.00
150,000.00 150,000.00 150,000.00 150,000.00
10,000.00 10,000.00 10,000.00 10,000.00
72,000.00 72,000.00 72,000.00 72,000.00
158,000.00 202,000.00 250,400.00 303,640.00

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