Case Study 2- Adrian Lekaj

1) Illuminated Elect Statement of Incr Year 1 Year 2 Year 3 Sales in units 9000 15000 18000 Sales in $ (35) 315000 525000 630000 Varible expenses ($15) 135000 225000 270000 Incremental conribution margin 180000 300000 360000 Incremental Fixed expenses: Salaries and other 85000 85000 85000 Advertising 180000 180000 150000 Total Fixed expenses 265000 265000 235000 Net cash inflow (outflow) -85000 35000 125000 2) 0 1 2 3 Cost of equipment -315,000 Working capital -60000 Yearly net cash flows -85000 35000 125000 Release of working capital Salvage value of equipment Total cash flows $ (375,000.00) $ (85,000.00) $ 35,000.00 $ 125,000.00 Discount facotr (14%) 1 0.87719298245614 0.7694675285 0.6749715162 Present Value -375000 -74561 26931 84371 Net Present Value 64,164 IRR 17.57% Profability Index 1.17 148500 Year Cash Flow Accum Cash Flow 0 -375,000 -375,000 1 -85000 -460,000 2 35000 -425,000 3 125000 -300,000 4 235000 -65,000 5 235000 170,000 6 310000 Payback: 4.27659574468085

3.A) 0 1 2 3 Cost of equipment -315,000 Working capital -60000 Yearly net cash flows -67000 65000 161000 Release of working capital Salvage value of equipment Total cash flows $ (375,000.00) $ (67,000.00) $ 65,000.00 $ 161,000.00 Discount facotr (7%) 1 0.93457943925234 0.8734387283 0.8162978769 Present Value -375000 -62617 56774 131424 Net Present Value 398,237 IRR 24.57% Profability Index 2.062 Year Cash Flow Accum Cash Flow 0 -375,000 -375,000 1 -67000 -442,000 2 65000 -377,000 3 161000 -216,000 4 279000 63,000 5 279000 342,000 6 279000 Payback: 3.7741935483871 3.B) 0 1 2 3 Cost of equipment -315,000 Working capital -60000 Yearly net cash flows -103000 5000 89000 Release of working capital Salvage value of equipment Total cash flows $ (375,000.00) $ (103,000.00) $ 5,000.00 $ 89,000.00 Discount facotr (15%) 1 0.86956521739131 0.7561436673 0.6575162324 Present Value -375000 -89565 3781 58519 Net Present Value -83101 IRR 10.08% Profability Index 0.778397899985

Year Cash Flow Accum Cash Flow 0 -375,000 -375,000 1 -103000 -478,000 2 5000 -473,000 3 89000 -384,000 4 191000 -193,000 5 191000 -2,000 6 191000 Payback: 5.0104712