#1 Cash flows for an expansion- the discount rate is 9.3%, the initial outlay would be \$1,970,000, and cash flow of \$460,000 per yr. for 6 yrs.
a. Calculate the present value
b. calculate the profitability index
c. round NPV of the expansion is \$ (round to the nearest dollar).

#2 Initial cash outlay of 79,000, expected cash flows of 25,280 at the end of each yr. for 6 yrs.
a. The payback period of the project is ? years.(round to nearest 2 decimals)
b. what is the project NPV?
c. what is the project PI?
d. what is the project IRR?

#3 a new project annually generates revenues of 1,800,000 and cash expenses include fixed and variable of 900,000, depreciation is increased by 160,000 per yr. The tax rate is 37%.
a. what is the firm's cash flow \$ ? (round to nearest dollar)

#4 A product line - can sell 12,000 items each year for 10yrs. The skateboards are \$80 w/variable cost of \$45 and annual fixed cost assoc. with production would be \$150,000. In addition an initial expenditure of 1,000,000 and will depreciate using simplified method down to 0 over 10yrs. The project will also have a 1 time investment of 40,000 in working capital. The firms marginal tax rate is 36%
a. what is the initial cash outlay assoc. with this project?
b. what are the annual net cash flows assoc. for yrs 1-9?
c. what is the terminal cash flow in year 10?
d. what is the projects NPV given a required rate of return at 11%?

#5 A Current firm's cost per unit (on a product) is \$0.87, it will rise at the rate of 15% annually over 3yrs. Current selling unit price is \$0.97 and is expected to rise at a 4% annual rate. If a manager expects to sell 5.5, 6.8, and 8 million units for the next 3 years-
a. What is gross profit or (loss) for 1yr? (round to nearest dollar)

#6 NPV, PI, IRR calculations -
Cash flows for an expansion
Discount rate is 9.3%, initial outlay would be 1,970,000, and cash flow of 460,000 per yr for 6 yrs.
a. calculate the net present value
b. calculate the profitability index
c. round NPV of the expansion is \$?

#7 Initial cash outlay of 79,000, expected cash flows of 25,280 at the end of each yr for 6yrs.
a.The payback period of the project is ? years (round off to 2 decimals)
b.what is the projects NPV?
c. what is " " PI?
d. what is " " IRR?

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UOP Finance Lab Problems Week3 Solution
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