How to include depreciation and working capital

Reference no: EM13217607

how to include depreciation and working capital in the following NPV analysis, because depreciation for the machinery goes for longer than the project timeline, and working capital needs to be accounted for as a percentage of sales.

Project timeline - 4 years
Investment required 1,200,000
- 1 mil for new machinery depreciated over 4 years, zero salvage value at end of 4 years
- 200,000 for building extension depreciated over 10 years
400,000 units will be sold equally spread over the 4 year timeline, at a fixed cost of 20 per unit
Cost of good sold is as following:
year 1 - 1,100,000
year 2 - 1,180,000
year 3 - 2,200,000
year 4 - 2, 360,000
Working capital is 10% of sales recovered at end of year 4
Depreciation - 20% diminishing value
Tax rate - 25%
required rate of return is 12%

Reference no: EM13217607

Questions Cloud

Topic administration of criminal justice : Use the Library resources to research the Metro Police Department and the history behind its development. Compare and contrast the agency with the current law enforcement structure of the Los Angeles Police Department.

Explain self esteem affects self efficacy : Explain the dynamics of how self esteem affects self efficacy? Provide an example of an internal or external force that impacts your self-efficacy? Respond to at least two of your peers for this posting and provide recommendations to extend their ..

Compute net present value of both projects : Big Shot Market is considering two investment projects: Project A Project B Initial Cost 250,000 200,000 Number of Periods 5 5 Yearly Net Cash Flow 75,000 60,000 Cost of Capital (WACC) 5% 5%

Describe and develop a problem statement for turnover : Develop a problem statement that is 250- 300 words. The topic of the problem should be turnover. Develop it as a phenomenological study.

How to include depreciation and working capital : how to include depreciation and working capital in the following NPV analysis, because depreciation for the machinery goes for longer than the project timeline, and working capital needs to be accounted for as a percentage of sales.

Technology contribute to organizational performance : Does Information Technology Contribute to Organizational Performance? Support your answer with a specific example

Ancient art-metropolitan museum of art : The Metropolitan Museum of Art, The Louvre Museum, The Smithsonian Institution Freer Gallery and Sackler Gallery. See the Course Materials List for access to these sites.

Explain and identify type of personality : Based on the inventory results, identify your type of personality, and the type of communication you prefer based on your style. Assess the adaptations you must make in order to effectively communicate with the other styles/personalities

Sociological perspectives-functionalism-conflict theory : Be certain to consider the three main sociological perspectives -- functionalism, conflict theory, and interactionism

User Account

All Pages