第二次作业答案(1-4) .)Yes. The sale of the machine is part of the project initiative. Therefore, the proceeds from the sale of the equipment should be counted B)No. The r&D expenditure is a sunk cost that should not be included in the project evaluation C)Yes. This is an opportunity cost that is borne by the company D)Yes. Capital expenditures must be incorporated in an NPV analysis E)It is the depreciation tax shields that is the incremental cash flow and not the actual depreciation expense. F)It is the change in net working capital that is the incremental cash flow. Therefore, incremental cash flows are-$10 million at year 0, -$2 million at year 1, +S7 million at year 2 and +$5 million at year 3 G) No, dividend payments are not incremental cash flows Question 2 Alternative One: Increases in annual profits S50,000( Cost Saving)-$20,000(Maintenance Cost)=$30, 000 Annual net operating cash flows 30000×(1-0.35)+$60,000×0.35(dep. tax shields)=$40,500 At 10% discount rate, the project NPV 40,50040,500 40.500 -300.000+ x1.10≈-$14673 The annualised capital cost(ACC) is given by ACCACC ACC 146473 1.101 →ACC=-$38,639 Alternative two $70,000(Cost Saving)-$15,000(Maintenance Cost)=$55,000 nnual net operating cash flows(years 1 to 7) 55000×(1-0.35)+($600,0007)×0.35(dep. tax shields)=s65,750 The net cash flow for year7:s65,750+S60,000×(1-0.35)=$104,750 At 10% discount rate, the project NPV 60000575065750 +65.750+104.750=-25988 10° The annual ised capital cost(ACC)is given by C Gary Xu AcF2 14 Princip les of Finance© Gary Xu AcF214 Principles of Finance 1 第二次作业答案（1－4） Question １ A) Yes. The sale of the machine is part of the project initiative. Therefore, the proceeds from the sale of the equipment should be counted. B) No. The R&D expenditure is a sunk cost that should not be included in the project evaluation. C) Yes. This is an opportunity cost that is borne by the company. D) Yes. Capital expenditures must be incorporated in an NPV analysis. E) It is the depreciation tax shields that is the incremental cash flow and not the actual depreciation expense. F) It is the change in net working capital that is the incremental cash flow. Therefore, incremental cash flows are -$10 million at year 0, -$2 million at year 1, +$7 million at year 2 and +$5 million at year 3. G) No, dividend payments are not incremental cash flows. Question ２ Alternative One: Increases in annual profits: $50,000 (Cost Saving) − $20,000 (Maintenance Cost) = $30,000 Annual net operating cash flows: $30,000  (1-0.35) + $60,000  0.35 (dep. tax shields) = $40,500 At 10% discount rate, the project NPV: $146,473 1.10 40,500 1.10 40,500 1.10 40,500 300,000 2 5 − + + ++ = − The annualised capital cost (ACC) is given by 2 5 1.10 1.10 1.10 146,473 ACC ACC ACC − = + ++  ACC = −$38,639 Alternative Two Increases in annual profits: $70,000 (Cost Saving) − $15,000 (Maintenance Cost) = $55,000 Annual net operating cash flows (years 1 to 7): $55,000  (1-0.35) + ($600,000/7)  0.35 (dep. tax shields) = $65,750 The net cash flow for year 7: $65,750 + $60,000  (1 − 0.35) = $104,750 At 10% discount rate, the project NPV: $259,888 1.10 104,750 1.10 65,750 1.10 65,750 1.10 65,750 600,000 2 6 7 − + + ++ + = − The annualised capital cost (ACC) is given by