question archive Carlsberg is considering a new retail lager investment in Copenhagen
Carlsberg is considering a new retail lager investment in Copenhagen
Subject:FinancePrice: Bought3
Carlsberg is considering a new retail lager investment in Copenhagen. Financial projections for the investment are tabulated here. The Danish corporate tax rate is 25 per cent and the investment is depreciated using 20 per cent reducing balances. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project and the investment is sold at its residual value after depreciation.
| Year 0(€) | Year 1(€) | Year 2(€) | Year 3(€) | Year 4(€) | |||||||||||
| Investment | 325,000 | – | – | – | – | ||||||||||
| Sales revenue | – | 105,000 | 105,000 | 105,000 | 105,000 | ||||||||||
| Operating costs | – | 20,000 | 20,000 | 20,000 | 20,000 | ||||||||||
| Net working capital spending | 2,000 | 2,000 | 3,000 | 4,000 | ? | ||||||||||
Suppose the project requires an initial investment in net working capital of €2,000 and the investment will have a market value of €1,000 at the end of the project. Assume the discounting rate to be 12%.
Required:
What is the project’s net cash flow for each year? (Do not include the euro signs (€). Negative amounts should be indicated by a minus sign.)
| 0 | 1 | 2 | 3 | 4 | |
| Incremental cash flow | € | € | € | € | € |
What is the NPV? (Do not include the euro sign (€). Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answers to two decimal places. (e.g., 32.16).)
