GROUP ASSIGNMENT COVER SHEET

STUDENT DETAILS

Student name: Hoang Uyen Bao Tran Student ID number: WSU21000150

Student name: Phan Phuc Nguyen Student ID number: 21000340
Student name: Huynh Le Thanh Dat Student ID number: 21000720
Student name: Pham Gia Khanh Student ID number: WSU21000046
Student name: Vu Tran Yen Tho Student ID number: 21001305
Student name: Do Duong Minh Thuy Student ID number: 21001161
UNIT AND TUTORIAL DETAILS

Unit name: Corporate Finance Unit number: CF-T123WSB-4

Tutorial/Lecture: Class day and time: Friday, 12:00 - 15:15
Lecturer or Tutor name: Tu Thi Kim Thoa
ASSIGNMENT DETAILS

Title: Group Exercise 1

Length: 340 words Due date: 15/02/2023 Date submitted: 15/02/2023
DECLARATION
✔ I hold a copy of this assignment if the original is lost or damaged.
I hereby certify that no part of this assignment or product has been copied from any other student’s work or from any
✔
other source except where due acknowledgement is made in the assignment.
I hereby certify that no part of this assignment or product has been submitted by me in another (previous or
✔ current) assessment, except where appropriately referenced, and with prior permission from the Lecturer / Tutor /
Unit Coordinator for this unit.
No part of the assignment/product has been written/ produced for me by any other person except where
✔
collaboration has been authorised by the Lecturer / Tutor /Unit Coordinator concerned.
I am aware that this work may be reproduced and submitted to plagiarism detection software programs for the purpose
✔
of detecting possible plagiarism (which may retain a copy on its database for future plagiarism checking).

Student’s signature: TRAN

Student’s signature: NGUYEN

Student’s signature: DAT

Student’s signature: KHANH

Student’s signature: THO

Student’s signature: THUY

Note:  An examiner or lecturer/tutor has the right to not mark this assignment if the above declaration has not been signed. 
Your company has been doing well, reaching $1 million in earnings, and is considering launching a new product. Designing the new
product has already cost $500,000. The company estimates that it will sell 820,000 units per year for $6.75 per unit and variable non-
labor costs will be $1.5 per unit. Production will end after year 3. New equipment costing $1 million will be required. The equipment
will be put into use in year 1 and depreciated to zero using the 7-year MACRS schedule. You plan to sell the equipment for book
value at the end of year 3. Your current level of working capital is $310,000. The new product will require the working capital to
increase to a level of $450,000 immediately, then to $465,000 in year 1, in year 2 the level will be $320,000, and finally in year 3 the
level will return to $310,000. Your tax rate is 21%. The discount rate for this project is 10%. Do the capital budgeting analysis for this
project and calculate its NPV.

Table of parameters
Project's Life 3
Installed cost 1000000
Salvage 437300
Sales/Revenue 5535000
Opex 1230000
NWC 310000
Tax rate 21%
Discount rate 10%
Sunk cost 500000

Year MACRS rate Depreciation

1 14,29% 142900
2 24,49% 244900
3 17,49% 174900

Book value = 1000000 – (142900 + 244900 + 174900) = 437300

  Year 0 Year 1 Year 2 Year 3
Sales (number unit * unit per sales)   5535000 5535000 5535000
Cost (number unit * unit per cost)   1230000 1230000 1230000
Dep (MACRS rate * installed cost)   142900 244900 174900
EBT (Sales - Cost - Dep)   4162100 4060100 4130100
Tax (EBT * 21%tax)   874041 852621 867321
NI (EBT - Tax)   3288059 3207479 3262779
OCF (EBT + Dep - Tax)   3430959 3452379 3437679
Cost of machine 1000000      
AT salvage (Sales of fix asset - %tax*(Sale of fix Asset - Book value))       437300
NCS (purchase of new FA - After tax Sales of current FA) 1000000 0 0 -437300
NWC 450000 465000 320000 310000
DNWC (NWC t - NWC t1) 140000 15000 -145000 -10000
Opportunity Cost        
CFFA ( OCF - NCS - DNWC - Opportunity cost) -1140000 3415959 3597379 3884979
CF 1 CF 2 CF 3
NPV (-Cost + + + )
(1+r )1 (1+r )2 (1+r )3
$ 7.857.300