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  • Lockheed Solution

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    p23ayushs
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    This document summarizes the cash flows of a project from 1967-1977, including scenarios where the project continues or is abandoned in 1971. If continued: 1) Upfront costs are paid from 1967-1971 while deposits are received in later years; 2) Revenues begin in 1972 and production costs are incurred annually; 3) The NPV is negative if continued from inception but positive if continued from 1970. If abandoned in 1971: 1) Half the upfront costs are refunded and deposits are returned, resulting in a cash outflow that year.

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    This document summarizes the cash flows of a project from 1967-1977, including scenarios where the project continues or is abandoned in 1971. If continued: 1) Upfront costs are paid from 1967-1971 while deposits are received in later years; 2) Revenues begin in 1972 and production costs are incurred annually; 3) The NPV is negative if continued from inception but positive if continued from 1970. If abandoned in 1971: 1) Half the upfront costs are refunded and deposits are returned, resulting in a cash outflow that year.

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    3 views2 pages

    Lockheed Solution

    Uploaded by

    p23ayushs
    This document summarizes the cash flows of a project from 1967-1977, including scenarios where the project continues or is abandoned in 1971. If continued: 1) Upfront costs are paid from 1967-1971 while deposits are received in later years; 2) Revenues begin in 1972 and production costs are incurred annually; 3) The NPV is negative if continued from inception but positive if continued from 1970. If abandoned in 1971: 1) Half the upfront costs are refunded and deposits are returned, resulting in a cash outflow that year.

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    of 2

    Cash flows at inception

    Upfront Balance of Production Total Cash


    Year costs Deposits Revenues Cost flow
    1967 -100 -100
    1968 -200 -200
    1969 -200 -200
    1970 -200 140 -60
    1971 -200 140 -490 -550
    1972 140 420 -490 70
    1973 140 420 -490 70
    1974 140 420 -490 70
    1975 140 420 -490 70
    1976 420 -490 -70
    1977 420 420

    NPV as of end 1966 at 10% -530.95


    Cash flows if Lockheed continues the project Cash flow if it Incremental
    abandons cash flow
    Upfront Balance of Production Total Cash Total Cash Total Cash
    Year costs Deposits Revenues Cost flow flow flow
    1971 -200 140 -490 -550 -240 -310
    1972 140 420 -490 70 70
    1973 140 420 -490 70 70
    1974 140 420 -490 70 70
    1975 140 420 -490 70 70
    1976 420 -490 -70 -70
    1977 420 420 420

    NPV as of end 1970 at 10% 95.91

    Cash flows if Lockheed abandons the project in early 1971


    Upfront Refund of Total Cash
    costs advance flow
    say 50%
    1971 -100 -140 -240

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