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Financial Analysis for Truck Plant

This document provides information to calculate the net present value (NPV) of a proposed plant to manufacture lightweight trucks. It gives cash flow information over 10 years, including revenue, expenses, capital expenditures, depreciation and net working capital. It asks to calculate the NPV for the base case using a 12% discount rate, and to create a graph showing how the NPV changes with different discount rates from 5-30% to determine what ranges produce a positive NPV.

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Enrique M.
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43 views1 page

Financial Analysis for Truck Plant

This document provides information to calculate the net present value (NPV) of a proposed plant to manufacture lightweight trucks. It gives cash flow information over 10 years, including revenue, expenses, capital expenditures, depreciation and net working capital. It asks to calculate the NPV for the base case using a 12% discount rate, and to create a graph showing how the NPV changes with different discount rates from 5-30% to determine what ranges produce a positive NPV.

Uploaded by

Enrique M.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Problem 7-23

a. For this base-case scenario, what is the NPV of the plant to manufacture lightweight trucks?
b.

c.

d.
To examine the sensitivity of this project to the discount rate, management would like to compute the NPV for different discount
rates. Create a graph, with the discount rate on the x-axis and the NPV on the y-axis, for discount rates ranging from 5% to 30%. For
what ranges of discount rates does the project have a
positive NPV?

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Sales revenue 100.00 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!
Manufacturing expenses other than
depreciation 35.00 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!
Marketing expenses 10.00 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!
Depreciation 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00
Equals net operating income $40.00 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!
Minus income tax #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!
Equals Unlevered Net income #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!
Plus depreciation 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00
Additions to net working capital (5.00) (5.00) (5.00) (5.00) (5.00) (5.00) (5.00) (5.00) (5.00) (5.00)
Capital Expenditures (150.00)
Continuation value 12.00
Free cash flow ($150.00) #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Cost of capital 12.00%


NPV #REF!

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