GROUP ASSIGNMENT COVER SHEET

STUDENT DETAILS

Student name: Bùi Thị Kim Ngân Student ID number: 21000949

Student name: Đinh Ngọc Loan Vy Student ID number: 21001291

Student name: Đỗ Đăng Khoa Student ID number: 21000656

Student name: Nguyễn Hoàng Anh Thư Student ID number: 21001356

Student name: Nguyễn Xuân Hoàng Student ID number: 21000910

Student name: Hồ Phạm Ngọc Thanh Student ID number: 21000703
UNIT AND TUTORIAL DETAILS

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

12:00 PM -
Tutorial/Lecture: Class day and time: 15:15 PM Wednesday
Lecturer or Tutor name: Tu Thi Kim Thoa

ASSIGNMENT DETAILS
Title: Group Exercise 2
Length: Due date: 22/02/2023 Date submitted: 22/02/2023

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: Ngân

Student’s Signature: Vy

Student’s Signature: Khoa

Student’s Signature: Thư

Student’s Signature: Hoàng

Student’s Signature: Thanh

Note: An examiner or lecturer / tutor has the right to not mark this assignment if the above declaration has
not been signed.
 EXERCISE 2

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 750,000 units per year for $5 per unit and variable
non-labor costs will be $1 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 $280,000. The new
product will require the working capital to increase to a level of $320,000 immediately, then
to $410,000 in year 1, in year 2 the level will be $370,000, and finally in year 3 the level will
return to $280,000. 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.

Years MACRS rate Depreciation

1 14.29% $1,000,000*14,29%= $142,900

2 24.29% $1,000,000*24,49%= $244,900

3 17.49% $1,000,000*17,49%= $174,900

Accumulated depreciation = $142,900 + $244,900 + $174,900 = $562,700

Book value at the end of project life = ($1,000,000 - $562,700) = $437,300

Salvage value of sale value = $437,300 (No gain no loss and no tax )
 Year 0 Year 1 Year 2 Year 3 Formula

Sales/Revenue 3,750,000 3,750,000 3,750,000 Quantity*Price

Costs 750,000 750,000 750,000 Quantity +

Variable Cost

Depreciation 142,900 244,900 174,900 Equipment Costs

+ MACRS rate

EBT 2,857,100 2,755,100 2,825,100 Sales - Costs -

Depreciation

Tax@21% 599,991 578,571 593,271 Tax rate *EBT

NI 2,257,109 2,176,529 2,231,829 EBT - Tax

OCF 2,400,009 2,421,429 2,406,729 EBT + Dep - Tax

Purchase of 1,000,000
FA

A.T Salvage 437,300 Sales of FA - %tc

* (Sales of FA -
Book value of
FA)

NCS 1,000,000 -437,300 Purchase of FA -

A.T Salvage

NWC 320.000 410,000 370,000 280,000

D.NWC 40,000 90,000 -40,000 -90,000 (DNWC) =

NWC(t-1) -
NWCt

Opportunity
costs of assets

CFFA -1,040,000 2,310,009 2,461,429 2,934,029 OCF - NCS -

D.NWC

NPV@10% $5,298,626.44 -Cost+(CFFA/(1+

r)^1)+(CFFA/(1+r
)^2)+(CFFA/(1+r)
^3)