1.

Net Initial Investment

Auto-Press USD Net Working Capital
Purchase Price of New Asset 930,000 Current Asset Changes Current Liab Changes
Installation Cost 50,000 30,000 Decrease in Inventories 45,000 Increase in AP
Net Working Capital 180,000 220,000 Increase in AR
Proceeds from Sale of Old Press -520,000 35,000 Increase in Cash
Tax on Sale of Old Press 156,000 225,000 45,000
Total Initial Investment 796,000 Net Working Capital = 180,000

Auto-Press USD
Purchase Price of New Asset 740,000
Installation Cost 30,000
Proceeds from Sale of Old Press -520,000
Tax on Sale of Old Press 156,000
Total Initial Investment 406,000

2. Net Operating Cash Flows

Old Press Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA 220,000 220,000 220,000 220,000 220,000
Depreciation -50,000 -50,000 -50,000 -50,000 -50,000
EBIT 170,000 170,000 170,000 170,000 170,000
Tax -51,000 -51,000 -51,000 -51,000 -51,000
Earnings after Tax 119000 119000 119000 119000 119000
Depreciation 50,000 50,000 50,000 50,000 50,000
Operating Cash Inflows 169,000 169,000 169,000 169,000 169,000

Autopress Year 1 Year 2 Year 3 Year 4 Year 5

EBITDA 350,000 370,000 400,000 430,000 470,000
Depreciation -96,000 -96,000 -96,000 -96,000 -96,000
EBIT 254,000 274,000 304,000 334,000 374,000
Tax -76,200 -82,200 -91,200 -100,200 -112,200
Earnings after Tax 177800 191800 212800 233800 261800
Depreciation 96,000 96,000 96,000 96,000 96,000
Operating Cash Inflows 273,800 287,800 308,800 329,800 357,800
 Regular Press Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA 310,000 310,000 310,000 310,000 310,000
Depreciation -68,000 -68,000 -68,000 -68,000 -68,000
EBIT 242,000 242,000 242,000 242,000 242,000
Tax -72,600 -72,600 -72,600 -72,600 -72,600
Earnings after Tax 169400 169400 169400 169400 169400
Depreciation 68,000 68,000 68,000 68,000 68,000
Operating Cash Inflows 237,400 237,400 237,400 237,400 237,400

3. Terminal Cash Flow

Aftertax Proceeds of AutoPress
Proceeds from Sale (Auto) 500,000
Tax on Sale (Auto) -150,000
Total After Tax ( Auto) 350,000
Aftertax Proceeds of Old Press
Proceeds from Sale(Old) 250,000
Tax on Sale (Old) -75,000
Total after Tax(Old) -175000
Add: Change in Net Working Capital 156,000
Terminal Cash Flow of Auto-Old 331,000

Aftertax Proceeds of Regular

Proceeds from Sale (Reg) 430,000
Tax on Sale (Reg) -129,000
Total After Tax ( Reg) 301,000
Aftertax Proceeds of Old Press
Proceeds from Sale(Old) 250,000
Tax on Sale (Old) -75,000
Total after Tax(Old) -175000
Add: Change in Net Working Capital 0
Terminal Cash Flow of Regular-Old 126,000

4. Payback Period
 Autopress Regular Press
Initial Investment 796,000 406,000
Operating Cash Net Invested
Year Inflow Cash Operating Cash Inflow Net Invested Cash
1 273800 -522,200 237400 -168,600
2 287800 -234,400 237400 68,800 [(thePayback
numberPeriod=
of the Year of last negative net invested cash) +
3 308800 74,400 237400 306,200
(the amount of last negative net invested cash / next year’s operating cash flow)]
4 329800 404,200 237400 543,600
5 375800 780,000 237400 781,000
Total Cash Inflows 1576000 1187000
Payback Period 3 1.71

5. Net Present Value Comparative Representation of Results

Cost of Capital 14% Auto Press Regular Press
Year Auto-Press Regular Press Initial Net Investment 796,000 406,000
0 -796000 -406,000 Operating Cash Inflows
1 273800 237400 Year 1 273800 237400
2 287800 237400 Year 2 287800 237400
3 308800 237400 Year 3 308800 237400
4 329800 237400 Year 4 329800 237400
5 375800 237400 Year 5 375800 237400
NPV 143,134 408,282 Payback Period 3 1.71
NPV at 14% 143,134 408,282
6. Internal Rate of Return (IRR) IRR 21.30% 51.01%
Year AutoPress Regular Press
0 -796000 -406,000
1 273800 237400
3 287800 237400
4 308800 237400
5 329800 237400
6 375800 237400
IRR 21.30% 51.01%

7. Capital Rationing
 Auto Press Regular Press
Profitability Index 1.18 2

Note: All amounts are calculated in USD ($)

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