Project Proposal

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Overview of Project

Year Sales Variable Cost Fixed Cost Total Cost Operating Cash Flow (CFt) CFt/(1 +k)t
1 $       3,050,000 $1,982,500 $400,000 $2,382,500 $467,250 $417,188
2 $       4,000,000 $2,600,000 $420,000 $$3,020,000 $686,000 $546,875
3 $       5,000,000 $3,250,000 $441,000 $3,691,000 $916,300 $652,204
4 $       5,500,000 $3,575,000 $463,050 $4,038,050 $1,023,365 $650,367
5 $       6,050,000 $3,932,500 $486,203 $4,418,703 $1,141,908 $647,949
6 $       6,655,000 $4,325,750 $510,513 $4,836,263 $1,273,116 $645,000
7 $       7,320,500 $4,758,325 $536,038 $5,294,363 $1,418,296 $641,565
8 $       7,686,525 $4,996,241 $562,840 $5,559,081 $1,489,211 $601,467
9 $       8,070,851 $5,246,053 $590,982 $5,837,035 $1,563,671 $563,876
10 $       8,474,394 $5,508,356 $620,531 $6,128,887 $1,641,855 $528,633
Total $5,895,124

 

 

Initial Investment Outlay = R&D + Policy Charge + Initial Purchase (equipment & furniture) + Ancillary Programming & Machinery

Initial Investment Outlay = $300,000 + $200,000 + $4,500,000 + $1,500,000 = $6,200,300

Operating Cash Flow = (revenue – costs) *(1 – 30%)

Net Present Value = ($6,200,300) +, where k = 12%

Net Present Value = ($6,200,300) + $5,895,124 + Salvage = $305,176 + $500,000 = $194,824

Based on the Net Present Value of the project, the project requires less cash than what is worth. This is visible from the difference between the present value and the costs of the project. The cost of the project (-6,200,300) is slightly lower than the present value of the project. This is an indication that the project is profitable and worth executing; WBC will benefit from the project.