Investment $ 500,000

Depreciation 5 years
Depreciation $ 100,000
Cash Savings $ 200,000 per year
Tax rate 40%

Year 0 Year 1 Year 2 Year 3 Year 4

Cash Savings $ 200,000 $ 200,000 $ 200,000 $ 200,000
Depreciation $ 100,000 $ 100,000 $ 100,000 $ 100,000
EBIT $ 100,000 $ 100,000 $ 100,000 $ 100,000
Tax $ 40,000 $ 40,000 $ 40,000 $ 40,000
EAT Earning after tax $ 60,000 $ 60,000 $ 60,000 $ 60,000
+Depreciation $ 100,000 $ 100,000 $ 100,000 $ 100,000
-Capex $ 500,000
Market value Y5 after tax
Cash Flow -$ 500,000 $ 160,000 $ 160,000 $ 160,000 $ 160,000

Cost fo capital 8%

NPV Net present value $ 169,460

TIR 19.70%

Book value $ 500,000 $ 400,000 $ 300,000 $ 200,000 $ 100,000

Market value year 5

Gain

Tax Gain

Market value Y5 after tax

 Year 5
$ 200,000
$ 100,000
$ 100,000
$ 40,000
$ 60,000
$ 100,000

45,000
$ 205,000

$ -

75,000

75,000

30,000

45,000