Exercise / Step 2: Net Present Value
Let's calculate a Net Present Value
From a downloadable spreadsheet which you will use as a framework (available, click on Step 2 NPV_frame.xlsx to download), you will calculate a Net Present Value from basic parameters.
You got the following information:
– Investment lifetime 8 years
– Cost of the machine 1,000 ($k)
– Annual EBITDA 400 ($k)
– Corporate tax rate 30%
– WACC (discount rate) 7%
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Question 1 of 4
1. Question
Calculate (for the first year only, as the spreadsheet will automatically copy on the right for years 2 to 8) the EBITDA after tax generated by the investment (cell C28)
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Question 2 of 4
2. Question
Calculate (for the first year only, as the spreadsheet will automatically copy on the right for years 2 to 8) the tax savings generated by the depreciation of the machine (cell C31)
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Question 3 of 4
3. Question
Calculate (for the first year only, as the spreadsheet will automatically copy on the right for years 2 to 8) the annual cash-inflows generated by the project.
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Question 4 of 4
4. Question
How many years does it takes to repay the initial investment with accumulated discounted cash-flows (cell F44)
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Simply when the accumulated discounted cash-flows become positive