Incremental Cash Flow Spreadsheet by irb16338

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									  Student instructions: This worksheet is for problem 11-9 on page 329. Information necessary to solve the problem
  is listed below in the section marked "assumptions." Below, in the incremental cash flow section, enter values and
  formulas in the blanks where indicated to complete the calculations needed to answer the question. Finally, at the
  bottom of the spreadsheet, enter the appropriate formulas to calculate the NPV and IRR of the investment.




                                       PROBLEM 11-9

                      GHOST SQUADRON HISTORICAL AIRCRAFT, INC.


ASSUMPTIONS:
                                                  Yr 1          Yr 2         Yr 3        Yr 4        Yr 5        Yr 6       Yr 7    Yr 8
                       MACRS Depreciation       14.3%         24.5%        17.5%       12.5%        8.9%        8.9%       8.9%    4.5%

                                   Tax rate       35%
                             Cost of capital      12%


ESTIMATED INCREMENTAL CASH FLOWS:

Initial Investment at t=0:

     Crew transport & wreckage collection
            Transport to restoration facility
                          Plane restoration
                    Total Initial Investment

                                       Year:          1            2            3           4           5              6      7

                            New Revenues
             Additional operating expenses
                     Depreciation on plane
              Change in Operating Income
                        Tax on new income
              Change in Earnings after tax

                      Add back depreciation

               Net Incremental Cash Flows

Additional Cash Flows at the end of year 7:

               Proceeds from sale of plane
                      Book value of plane
                       Taxable gain(loss)
                              Tax on gain

           Net cash flow from sale of plane
           (Salvage value less tax on gain)


SUMMARY OF NET CASH FLOWS:
                                      Time:           0            1            2           3           4              5      6       7



                         Net present Value:

                    Internal rate of Return:

								
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