FIN 3701 ASSIGNMENT 1 EXPECTED SOLUTIONS 2023

, QUESTION 1
0 1 2 3 4
Initial Investment 8,500,000.00
Depreciation -3,400,000.00 -1,700,000.00 -1,700,000.00 -1,700,000.00
Sales revenue 5,950,000.00 5,950,000.00 5,950,000.00 5,950,000.00
Operational costs -2,480,000.00 -2,480,000.00 -2,480,000.00 -2,480,000.00
Profit before tax 70,000.00 1,770,000.00 1,770,000.00 1,770,000.00
Tax at 28% -19,600.00 -495,600.00 -495,600.00 -495,600.00
Profit after tax 50,400.00 1,274,400.00 1,274,400.00 1,274,400.00
Add back Depreciation 3,400,000.00 1,700,000.00 1,700,000.00 1,700,000.00
After tax proceeds on
1,512,000.00
disposal


Investment in working
-475,000.00 475,000.00
capital
Cashflow -8,975,000.00 3,450,400.00 2,974,400.00 2,974,400.00 4,961,400.00
Discount @12% 1.00 0.89 0.80 0.71 0.64
Discounted cashflow -8,975,000.00 3,080,714.29 2,371,173.47 2,117,119.17 3,153,059.39
Net present value 1,747,066.32

Discount factor @25% 1.00 0.80 0.64 0.51 0.41
-8,975,000.00 2,760,320.00 1,903,616.00 1,522,892.80 2,032,189.44
-755,981.76


IRR 12%+ 1,747,066.32 (25% - 12%)
1747066+755981