Project #28023 - finance

its in excel so i want to attach it but dont know how

 Excel Project
                 
Webmasters.com has developed a powerful new server that would be used for corporations’ Internet activities.  It would cost $11 million to buy the equipment necessary to manufacture the server, and it would require net operating working capital equal to $2.2 million.  The servers would sell for $21,500 per unit, and Webmasters believes that variable costs would amount to $16,500 per unit.  After the first year, the sales price and variable costs would increase at the inflation rate of 3%.  The company’s fixed costs would be $0.8 million per year, and would increase with inflation. It would take one year to buy the required equipment and set up operations, and the server project would have a life of 4 years.  If the project is undertaken, it must be continued for the entire 4 years.  Also, the project’s returns are expected to be highly correlated with returns on the firm’s other assets.  The firm believes it could sell 1,500 units per year.
                 
The equipment would be depreciated over a 7-year period, using MACRS rates.  The estimated market value of the equipment at the end of the project’s 4-year life is $1million.  Webmasters’ federal-plus-state tax rate is 40%.  Its cost of capital is 11% for average risk projects.
                 
a.  Develop a spreadsheet model and use it to find the project’s NPV, IRR, and payback.  
                 
                 
            Key Output:    NPV  =  
Part 1.  Input Data (in thousands of dollars)         IRR    =  
                MIRR =  
Equipment  cost   $11,000          
NOWC needed   3%   Market value of equipment in Year 4  
First year sales (in units)   22   Tax rate      
Sales price per unit   $21.50   WACC      
Variable cost per unit   $16.50   Inflation      
Fixed costs     $80          
                 
Part 2.  Depreciation and Amortization Schedule Years Accum'd
Year     Initial Cost 1 2 3 4 Depr'n
                 
Equipment Depr'n Rate                
Equipment Depr'n, Dollars                
Ending Bk Val: Cost - Accum Dep'rn                
                 
Part 3.  Net Salvage Values, in Year 4     Equipment      
Estimated Market Value in Year 4            
Book Value in Year 4              
Expected Gain or Loss              
Taxes paid or tax credit              
Net cash flow from salvage            
                 
Part 4.  Projected Net Cash Flows (Time line of annual cash flows)        
    Years 0 1 2 3 4
     Investment Outlays at Time Zero:            
Equipment                
NOWC needed              
                 
     Operating Cash Flows over the Project's Life:          
Units sold                
Sales price per unit              
Variable costs per unit              
                 
Sales revenue              
Variable costs              
Fixed operating costs              
Depreciation (equipment)              
Oper. income before taxes (EBIT)            
Taxes on operating income (40%)            
Net Operating Profit After Taxes (NOPAT)          
Add back depreciation              
         Operating cash flow            
                 
     Terminal Year Cash Flows:            
Recovery of NOWC              
                 
     Terminal Year Cash Flows:            
Net salvage value              
                 
Net Cash Flow (Time line of cash flows)            
                 
Part 5.  Key Output:  Appraisal of the Proposed Project        
                 
Net Present Value               
IRR                
MIRR                
                 
Payback (See calculation below)                 
                 
Data for Payback    Years   0 1 2 3 4
              Cumulative CF from Row 75          
              IF Function to find payback          

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Due By (Pacific Time) 04/17/2014 12:00 am
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