Inputs

Initial
investment 6,000,000
Depreciation
period 5
Salvage value 500,000
NWC = % of
forecasted
sales 10%
Production
cost =%sales 25%
Discount rate 12%
Tax rate 25%

Year 0 1 2 3 4 5 Formula
4,000,00
Sales (in $) 2,000,000 2,400,000 0 4,000,000 2,400,000
10% * Forecasted
Net Working Sales (starting from
Capital 200,000 240,000 400,000 400,000 240,000 year 0)
1,000,00
Costs 500,000 600,000 0 1,000,000 600,000 25% * Sales
1,200,00 Initial Investment /
Depreciation 1,200,000 1,200,000 0 1,200,000 1,200,000 Depreciation Period

1,800,00 Sales - Costs -

EBT 300,000 600,000 0 1,800,000 600,000 Depreciation
Taxes at 25% 75,000 150,000 450,000 450,000 150000 EBT * Tax Rate

1,350,00
Net Income 225,000 450,000 0 1,350,000 450,000 EBT - Taxes at 25%
Depreciation 1,200,00
(added back) 1,200,000 1,200,000 0 1,200,000 1,200,000

Cash Flow
from 2,550,00 Net Income +
Operations 1,425,000 1,650,000 0 2,550,000 1,650,000 Depreciation
NWC (Previous
Change in Year) - NWC
NWC (200,000) (40,000) (160,000) 160,000 240,000 (Current Year)
Initial (6,000,000
Investment )
After-tax Salvage Value * (1 -
Salvage Value 375,000 Tax Rate)
 Year 0: NWC Cash
Flow + Initial
Investment
Year 1 -> Year 4:
NWC Cash Flow +
Cash Flow from
Operations
Year 5: NWC Cash
Flow + Cash flow
Total Cash from Operations +
Flow of (6,200,000 2,550,00 After-tax Salvage
Project ) 1,385,000 1,490,000 0 2,710,000 2,265,000 Value

Present (6,200,000 1,815,04 Total Cash Flow/(1

Value ) 1,236,607 1,187,819 0 1,722,254 1,285,222 + Discount Rate)^n

NPV 1,046,941