Mat 540 Week 3

FM8A

Corporate Finance Assignment

Wei Jiang CT0171246

Question 1.
a) Calculate the net initial outlay for this project in MMK
= $95,000

= $100,000

+ $2,000
×

+ $3,000

880
$1

= $100,000

= 88,000,000

b) Calculate after-tax cash flows in MMK for years 1 through 4.
Thanlyn Limited
Statement of Operating Cash Flow for Year 1 to Year 4
Year 1
Year 2
Year 3
Year 4
MMK
MMK
MMK
MMK
100,000,000 100,000,000 100,000,000 100,000,000
40,000,000
40,000,000
40,000,000
40,000,000
W1
18,900,000
18,900,000
18,900,000
18,900,000
41,100,000
41,100,000
41,100,000
41,100,000
W2
9,152,000
9,152,000
9,152,000
9,152,000
31,948,000
31,948,000
31,948,000
31,948,000
W3
6,389,600
6,389,600
6,389,600
6,389,600
6,389,600
25,558,400
25,558,400
25,558,400
25,558,400
18,900,000
18,900,000
18,900,000
18,900,000
44,458,400
44,458,400
44,458,400
44,458,400

Sales less: Costs less: Depreciation
EBIT
less: Interests
Profit before tax
Tax
Net Profit add: Depreciation
Operating cash flow

W1: Depreciation =
=

$

,

×

/$

,

,

= 18,900,000

W2: Interests = IO × interest rate = 88,000,000MMK × 10.4% = 9,152,000MMK
W3: Tax = profit before tax × tax rate = 31,948,000 × 20% = 6,389,600MMK

c) Calculate the project’s Net Present Value (in MMK) and explain if the project should