Assumptions - All Options Assumptions - New Equipment Assumptions - Capital Lease

Sales revenue per month $ 50,000 unmet demand & efficiency Useful life (in years) 8 Lease term (in years) 5 Lease IntRate
Margin on revenue 35% after DM & DL for OH & profit Original cost new $ 142,000 Down payment (yr 0) $ 50,000 15.8%
Discount rate 11% Salvage value (yr 5) $ 40,000 28% Monthly lease pymt $ 2,200 28.2%
Project life (in years) 10 Depreciation method: Straight-line Discount purchase $ 1 $182,000
U.S. small business tax rate 23.6% Source: Freshbooks (SBA data) https://www.freshbooks.com/hub/accounting/how-much-do-small-businesses-pay-taxes

Option 1) Purchase new CNC Year: 0 1 2 3 4 5 6 7 8 9 10

Investment
0 Equipment purchase (142,000)
0 Salvage value - - - - - (26,667)
Revenue
1 Net annual after direct costs 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000
Expenses
1 Annual operating expenses (120,000) (120,000) (120,000) (120,000) (120,000) (120,000) (120,000) (120,000) (120,000) (120,000)
Net cash flow (142,000) 73,736 73,736 73,736 73,736 73,736 73,736 73,736 73,736 68,760 42,093
Cumulative cash flow (142,000) (68,264) 5,471 79,207 152,943 226,678 300,414 374,150 447,885 516,645 558,739
NPV 279,157 Payback
IRR 51%

Option 2) Lease fin. new CNC Year: 0 1 2 3 4 5 6 7 8 9 10

Investment
0 Lease down pay & disc purch (50,000) (1) - - - - -
0 Salvage value - - - - - (26,667)
Revenue
1 Net annual after direct costs 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000
Expenses
1 Lease payments (26,400) (26,400) (26,400) (26,400) (26,400) - - - - -
1 Annual operating expenses (120,000) (120,000) (120,000) (120,000) (120,000) (120,000) (120,000) (120,000) (120,000) (120,000)
Net cash flow (50,000) 53,566 53,566 53,566 53,566 53,565 73,736 73,736 73,736 68,760 42,093
Cumulative cash flow (50,000) 3,566 57,132 110,698 164,264 217,829 291,565 365,301 439,036 507,796 549,890
NPV 296,612 Payback
IRR 108%

Option 3) Add third shift Year: 0 1 2 3 4 5 6 7 8 9 10

Revenue
1 Net annual after direct costs 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000 210,000
Expenses
1 Annual operating expenses (144,000) (144,000) (144,000) (144,000) (144,000) (144,000) (144,000) (144,000) (144,000) (144,000)
Incremental income (pre-tax) - 66,000 66,000 66,000 66,000 66,000 66,000 66,000 66,000 66,000 66,000
Income tax - (15,576) (15,576) (15,576) (15,576) (15,576) (15,576) (15,576) (15,576) (15,576) (15,576)
Net cash flow - 50,424 50,424 50,424 50,424 50,424 50,424 50,424 50,424 50,424 50,424
Cumulative cash flow - 50,424 100,848 151,272 201,696 252,120 302,544 352,968 403,392 453,816 504,240
NPV 296,959
IRR Err:523
Assumptions - Oper. Expenses
Opt 1-2 (Monthly OE) $ 10,000
Opt 3 (Monthly Empl) $ 12,000
Accel. Usage (Opt 3) 0
Sect. 179 (Opt 1 & 2) 0
(binary: 1=Yes, 0=No)

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Assumptions and Data Source

Monthly $ 12,000 per case for Option 3

Hourly $ 22.00 U.S. BLS, Occupational Outlook Handbook

Annual $ 45,760 40 hours per x 52 weeks per year (to cover holidays and vacation)

Hourly $ 23.10 Hourly with 5% premium for overnight third shift

Monthly $ 260.00 Health insurance (50% contribution) from HumanInterest.com

Monthly $ 10.00 Dental insurance partial contribution (instructor add)

Monthly $ 10.00 Life insurance - employer paid to $50k

Monthly $ 10.00 401k admin fees per participant

Rate 3.00% 401k match of 50% of 6% employee contribution

Rate 7.65% U.S. Federal employer's share of FICA (social security & medicare)

Rate 1.00% State unemployment insurance fund

 173.33 Avg hours per month (40*52/12)

$ 4,004.00 Wages at 3rd shift rate

$ 346.35 Payroll taxes (FICA & state unemp)

$ 290.00 Benefits and fees - monthly items

$ 120.12 Benefits - 401k match (at 6% empl)

$ 4,760.47 Total monthly average cost

2.52 # of employees covered by $12k

2.00 Round down (for various like OH, wage differences)