A project requires the following investments:

Gross value of equipment purchased 7,500

This equipment has useful life of 3 years.

Depreciation is 2500 per year. Salvage value is 0.
Year 0 Year 1 Year 2 Year 3
Working capital required 3,600 3,700 4,100 4,100

Minimum required return (discount rate) 10%

Tax rate 40%
Year 0 Year 1 Year 2 Year 3
Unit Sales 10,000 11,500 13,225
Sales price / unit 3.40 3.60 3.70
Variable Cost/ unit (excl. depn) 2.07 2.10 2.14
Fixed Cost (excl. depn.) 2,120 2,184 2,249
 Year 0 Year 1 Year 2 Year 3 Project Free Cash Flow
Unit Sales 10,000 11,500 13,225 Sales
Growth 15% 15% Variable costs
Sales price / unit 3.40 3.60 3.70 Fixed Costs
Variable Cost/ unit (e 2.07 2.10 2.14 Depreciation
Fixed Cost (excl. depn 2,120 2,184 2,249 EBIT
Taxes - 40%
Nopat
Gross valu 7,500 Add. Depreciation
Useful life 3 years Less. Capex
Salvage va - Less. Change in Net Working Capital
Depreciati2500 per year Free cash flow (Project Net Cash flow)
Discount R 10% Present value
Working Ca 3,600 3,700 4,100 4,100 Net present value
 1 2 3
Year 0 Year 1 Year 2 Year 3
34000 41400 48932.5
20700 24150 28302
2,120 2,184 2,249
2500 2500 2500
8680.00 12566.00 15882.00
3472 5026.4 6352.8
5208.00 7539.60 9529.20
2500 2500 2500
-7,500
-3,600 -100 -400 4,100
-11,100 7608.00 9639.60 16129.20
-11,100 6916.364 7966.612 12118.11
15,901