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Price of New System(incld. Installation costs) 350,000.00 Rate of Depreciation 20% 32% 19% 12% 11% 6%
Salvage Value of new system (at the end of next 5
years) 100,000.00 Old System 40,000.00 64,000.00 38,000.00 24,000.00 22,000.00 12,000.00
Increase in Inventory 40,000.00 New System 70,000.00 112,000.00 66,500.00 42,000.00 38,500.00 21,000.00
Annual Saving of Operating Costs by new system 40,000.00
Tax Rate 0.35
Discount Rate 0.12
Salvage Value of Old System(today) 100,000.00
Discounted Cash Flow Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Terminal Value@Year 5
0 1 2 3 4 5 Terminal Value@Year 5
Incremental revenue 40,000 40,000 40,000 40,000 40,000
D&A(New) 70,000 112,000 66,500 42,000 38,500
D&A(Old) 12,000 0 0 0 0
D&A(Increment) 58,000 112,000 66,500 42,000 38,500
Salvage Value of Old system 100,000 (50,000)
Salvage Value of New system 100,000
Gain from Salvage Value 88,000
Cashflow before taxation 88,000 (18,000) (72,000) (26,500) (2,000) 1,500
Taxation 30,800 (6,300) (25,200) (9,275) (700) 525 10,150
Cash flows after taxation (11,700) (46,800) (17,225) (1,300) 975
Add:D&A 58,000 112,000 66,500 42,000 38,500
Add: Capex (350,000)
Add: Change in Net Working Capital/Inventory (40,000) 40,000
Transaction Cashflow (320,800) 46,300 65,200 49,275 40,700 39,475 79,850
Discount Factor 1.000 0.893 0.797 0.712 0.636 0.567 0.567
DCF (320,800) 41,339 51,977 35,073 25,866 22,399 45,309
NPV (98,837)