COST OF NEW MACHINE 90000

EXPECTED LIFE 5 YEARS

SALVAGE VALUE 10000
INCREASE IN WC 20000
TAX RATE 0.4
DEP METHOD SLN
DISCOUNT RATE 0.1

SOLUTION: WORKING NOTES

COST OF MACHINE -90000 DEPRECIATION 16000
INCREASE IN WC -20000
TOTAL INTIAL OUTFLOW -110000

CALCULATION OF SUBSEQUENT CASH INFLOW

YEAR EARNINGS DEPRECIATION PBT TAX PAT CASH FLOWS
1 28000 16000 12000 4800 7200 23200
2 29000 16000 13000 5200 7800 23800
3 28000 16000 12000 4800 7200 23200
4 32000 16000 16000 6400 9600 25600
5 34000 16000 18000 7200 10800 26800

NPV -17683.3301252
CASH FLOWS