ASSUMPTIONS

Discount Rate 6.00%

Tax rate 40.00%
Startup Phase
Iniital Investment in PPE (paid in cash) $70,000.00
Residual Value for Depreciation Purposes $0.00
Useful Life in Years 7

R&D per year During Startup Phase (in

cash and expensed) $20,000.00

Operating Phase - Sales

Iniitial Sales Volume (in units) - Starts in
Year 3 2000
Sales Growth Rate per year 0.00%

Sales Price Per Unit $100.00

Product Gross Margin Pct 55.00%
Inflation Rate for Sales and COGS 0.00%

SG&A - Fixed Costs per year (not subject

to inflation) - Starts in Year 1 $ 25,000.00
SG&A - Variable Cost Per Unit (not subject
to inflation) Starts in Year 3 because there
are no sales until then $ 15.00

Working Capital Timing Issues

Collections From Customers
In year of sale 90.00%
Following year 10.00%

Desired Units of Inventory as a Percent of

that year's sales 10.00%

Payments To Suppliers on Purchases

Made This year
Percent Paid this year 95.00%
Percent Paid next year 5.00%

Payments to Employees for Compensaton

and Benefits Earned this year
Percent Paid this year 70.00%
Percent Paid Next year 30.00%

Termination / Shut Down Phase

Proceeds from Disposal of PPE $5,000.00
Other Disposal or Cleanup Costs $2,000.00
Markup Over Cost for Sale of Ending
Inventory 0.00%
Fixed SG&A Costs During This Phase $0.00
Variable SG&A During This Phase $0.00

1
Tax Depreciation Percentage 0.29

Intermediate Calculations
1
Book Depreciation Per Year $10,000.00
Tax Depreciation Per Year $20,300.00

Sales Volume (Growth built in) 0

Sales Price (inflation built in)
Sales Revenue $0.00

Desired Inventory in Units @ End of Year 0.00

Inventory in Units @ Beg of Year 0.00
Forecasted Sales in Units 0.00
Production in Units 0.00

Production Costs Per Unit (inflation built in) $0.00

Inventory in Dollars @ Beg of Year

Production Costs This year
Cost of Goods Sold (LIFO)
Inventory in Dollars @ End of Year (LIFO)

INCOME STATEMENT
1
Sales Revenue $0
Cost of Goods Sold $0
Gross Margin $0
Depreciation Expense $10,000
Research & Development $20,000
SG&A $25,000
Other Losses (Gains) $0
 Pre-tax Income (Loss( ($55,000)
Tax Expense (Benefit) ($26,120)
Net Income (Loss) ($28,880)

BALANCE SHEET
0 1
Assets
Current Assets
Cash ($70,000) ($81,380)
Accounts Receivable $0 $0
Inventory $0 $0
Total Current Assets ($70,000) ($81,380)
Property Plant and Equipment $70,000 $70,000
Less Accumulated Depreciation $0 $10,000
Long Term Assets $70,000 $60,000
Total Assets $0 ($21,380)

Liabilities
Current Liabilities
Accounts Payable $0 $0
Wages and Benefits Payable $0 $7,500
Other Liabilties $0 $0
Total Liabilites $0 $7,500

Owners Equity
Contributed Capital $0 $0
Retained Earnings $0 ($28,880)
Total Owners Equity $0 ($28,880)

Total Liabilties and Owners Equity $0 ($21,380)

CASH FLOW STATEMENT 0 1

Net Income ($28,880)
Add Depreciation $10,000
Minus Change in Accts Rec $0
Minus Change in Inventory $0
Plus Change in Accts Payable $0
Plus Change in Wages Payable $7,500
Other $0
Cash From Operations ($11,380)

Investment in PPE ($70,000) $0

Disposal of PPE $0 $0

Net Cash Inflow (Outflow) ($70,000) ($11,380)

NPV of future cash flows $96,624.32

NPV including Initial Investment $26,624.32

Internal Rate of Return 11.5%

Income For Tax Purposes

1
Sales Revenue $ -
Cost of Goods Sold $ -
Gross Margin $ -
Depreciation Expense $ 20,300.00
Research & Development $ 20,000.00
SG&A $ 25,000.00
Other Losses (Gains) $ -
Pre-tax Income $ (65,300.00)
Tax Expense $ (26,120.00)

Cash Flow Statement Direct 0 1

Cash Collections from Customers $0.00
Payments to Suppliers $0.00
Payments for R&D ($20,000.00)
Payments to Employees ($17,500.00)
Other Costs $0.00
Payments for Taxes $26,120.00
Cash From Operationa $0.00 -$11,380.00

Acquisition of PPE -$70,000.00 $0.00

Disposal of PPE $0.00 $0.00
Cash From Investment -$70,000.00 $0.00

-$70,000.00 -$11,380.00
 2 3 4 5 6
0.2 0.15 0.1 0.08 0.06

2 3 4 5 6
$10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00
$14,000.00 $10,500.00 $7,000.00 $5,600.00 $4,200.00

0 2,000.00 2,000.00 2,000.00 2,000.00

$100.00 $100.00 $100.00 $100.00
$0.00 $200,000.00 $200,000.00 $200,000.00 $200,000.00

0.00 200.00 200.00 200.00 200.00

0.00 0.00 200.00 200.00 200.00
0.00 2000.00 2000.00 2000.00 2000.00
0.00 2200.00 2000.00 2000.00 2000.00

$0.00 $45.00 $45.00 $45.00 $45.00

$0.00 $0.00 $9,000.00 $9,000.00 $9,000.00

$0.00 $99,000.00 $90,000.00 $90,000.00 $90,000.00
$0.00 $90,000.00 $90,000.00 $90,000.00 $90,000.00
$0.00 $9,000.00 $9,000.00 $9,000.00 $9,000.00

2 3 4 5 6
$0 $200,000 $200,000 $200,000 $200,000
$0 $90,000 $90,000 $90,000 $90,000
$0 $110,000 $110,000 $110,000 $110,000
$10,000 $10,000 $10,000 $10,000 $10,000
$20,000 $0 $0 $0 $0
$25,000 $55,000 $55,000 $55,000 $55,000
$0 $0 $0 $0 $0
 ($55,000) $45,000 $45,000 $45,000 $45,000
($23,600) $17,800 $19,200 $19,760 $20,320
($31,400) $27,200 $25,800 $25,240 $24,680

2 3 4 5 6

($102,780) ($80,630) ($45,280) ($10,040) $24,640

$0 $20,000 $20,000 $20,000 $20,000
$0 $9,000 $9,000 $9,000 $9,000
($102,780) ($51,630) ($16,280) $18,960 $53,640
$70,000 $70,000 $70,000 $70,000 $70,000
$20,000 $30,000 $40,000 $50,000 $60,000
$50,000 $40,000 $30,000 $20,000 $10,000
($52,780) ($11,630) $13,720 $38,960 $63,640

$0 $4,950 $4,500 $4,500 $4,500

$7,500 $16,500 $16,500 $16,500 $16,500
$0 $0 $0 $0 $0
$7,500 $21,450 $21,000 $21,000 $21,000

$0 $0 $0 $0 $0
($60,280) ($33,080) ($7,280) $17,960 $42,640
($60,280) ($33,080) ($7,280) $17,960 $42,640

($52,780) ($11,630) $13,720 $38,960 $63,640

2 3 4 5 6
 ($31,400) $27,200 $25,800 $25,240 $24,680
$10,000 $10,000 $10,000 $10,000 $10,000
$0 ($20,000) $0 $0 $0
$0 ($9,000) $0 $0 $0
$0 $4,950 ($450) $0 $0
$0 $9,000 $0 $0 $0
$0 $0 $0 $0 $0
($21,400) $22,150 $35,350 $35,240 $34,680

$0 $0 $0 $0 $0
$0 $0 $0 $0 $0

($21,400) $22,150 $35,350 $35,240 $34,680

2 3 4 5 6
$ - $ 200,000.00 $ 200,000.00 $ 200,000.00 $ 200,000.00
$ - $ 90,000.00 $ 90,000.00 $ 90,000.00 $ 90,000.00
$ - $ 110,000.00 $ 110,000.00 $ 110,000.00 $ 110,000.00
$ 14,000.00 $ 10,500.00 $ 7,000.00 $ 5,600.00 $ 4,200.00
$ 20,000.00 $ - $ - $ - $ -
$ 25,000.00 $ 55,000.00 $ 55,000.00 $ 55,000.00 $ 55,000.00
$ - $ - $ - $ - $ -
$ (59,000.00) $ 44,500.00 $ 48,000.00 $ 49,400.00 $ 50,800.00
$ (23,600.00) $ 17,800.00 $ 19,200.00 $ 19,760.00 $ 20,320.00

2 3 4 5 6
$0.00 $180,000.00 $200,000.00 $200,000.00 $200,000.00
$0.00 ($94,050.00) ($90,450.00) ($90,000.00) ($90,000.00)
($20,000.00) $0.00 $0.00 $0.00 $0.00
($25,000.00) ($46,000.00) ($55,000.00) ($55,000.00) ($55,000.00)
$0.00 $0.00 $0.00 $0.00 $0.00
 $23,600.00 -$17,800.00 -$19,200.00 -$19,760.00 -$20,320.00
-$21,400.00 $22,150.00 $35,350.00 $35,240.00 $34,680.00

$0.00 $0.00 $0.00 $0.00 $0.00

$0.00 $0.00 $0.00 $0.00 $0.00
$0.00 $0.00 $0.00 $0.00 $0.00

-$21,400.00 $22,150.00 $35,350.00 $35,240.00 $34,680.00

cm 40

43000
 1075
7
0.05 0.93

7 8
$10,000.00 0
$3,500.00 0

2,000.00 200.00
$100.00
$200,000.00 $9,000.00

200.00 0.00
200.00 200.00
2000.00 200.00
2000.00 0.00

$45.00 $0.00

$9,000.00 $9,000.00
$90,000.00 0
$90,000.00 $9,000.00
$9,000.00 $0.00

7 8
$200,000 $9,000
$90,000 $9,000
$110,000 $0
$10,000 $0
$0 $0
$55,000 $0
$0 ($3,000)
$45,000 $3,000
$20,600 $1,200
$24,400 $1,800

7 8

$59,040 $68,840
$20,000 $0
$9,000 $0
$88,040 $68,840
$70,000 $0
$70,000 $0
$0 $0
$88,040 $68,840

$4,500 $0
$16,500 $0
$0 $0
$21,000 $0

$0 $0
$67,040 $68,840
$67,040 $68,840

$88,040 $68,840

7 8
 $24,400 $1,800
$10,000 $0
$0 $20,000
$0 $9,000
$0 ($4,500)
$0 ($16,500)
$0 ($5,000) Moving the
$5000 Gain
$34,400 $4,800 on Sale of PPE
down to the
Operating
Section
$0 $0
$0 $5,000

$34,400 $9,800

7 8
$ 200,000.00 $ 9,000.00
$ 90,000.00 $ 9,000.00
$ 110,000.00 $ -
$ 3,500.00 $ -
$ - $ -
$ 55,000.00 $ -
$ - $ (3,000.00)
$ 51,500.00 $ 3,000.00
$ 20,600.00 $ 1,200.00

7 8
$200,000.00 $29,000.00
($90,000.00) ($4,500.00)
$0.00 $0.00
($55,000.00) ($16,500.00)
$0.00 ($2,000.00)
-$20,600.00 -$1,200.00
$34,400.00 $4,800.00

$0.00 $0.00
$0.00 $5,000.00
$0.00 $5,000.00

$34,400.00 $9,800.00