Frank Smith Plumbing Project

Frank Smith Plumbing
Project

Data Needed for analysis:
Year-1
Year-2

Cost of Capital (borrowing)
6.50%
Cost of Truck
$175,000
Cost of additional equiment attached to truck
$15,000
Tax rate
35%
Annual Before Tax & Depreciation Truck Projected Earnings

$68,000

$74,000

Depreciation Percentage Rate (MACRS)*
20.0%
32.0%
* The proposed truck has an estimated economic life of seven years but will be treated as a five-year MACRS property

Calculate the following -- light yellow highlighted cells need to be co
Year-0
Annual Before Tax & Depreciation Truck Projected Earnings
Depreciation Expense
Annual Before Tax Truck Projected Earnings
→
Tax
Annual Projected Truck Earnings
→

1

2

Depreciation to add back
Projected Truck Net Cash Flow
cumulative cash flow
discounted cash flow
cumulative discounted cash flow
Decision Criteria:

Pay Back Period
Discounted Pay Back Period (DPB)**
Net Present Value
Internal Rate of Return
Profitability Index

Years
Years

Recommendations:

mith Plumbing

ded for analysis:
Year-3

$78,000

Year-4

Year-5

$80,000

$84,000

Year-6

Year-7

Year-8

$83,000

$84,000

$85,000

19.2%
11.5%
11.5%
5.8%
ed as a five-year MACRS property for depreciation purposes.

0.0%

0.0%

ow highlighted cells need to be completed

sion Criteria:

mmendations:

3

4

5

6

7

8