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A B D E F G H Question 1: 10 pts TACC + Value FLIR is considering investing in a manuracturing equipment to produce seawortny arones. ne price of the equipment will be $3.385, 000, and its economic life is five years. The machine falls into the 5 year MACRS asset class and will be depreciated using those rates. At the end of the project life, FLIR expects to sell the equipment in the used market for $450,000. From the start, 2, 250 drones will be produced each year. The price of each drone will be $4, 355 in the first year and will increase by 3 percent per year. The production cost per drone will be $3,750 in the first year and will increase by 2 percent per year. The project will have an annual fixed cost of $555, 000 and require an immediate investment of $167.000 in net working capital. The corporate tax rate for the company is 25 percent. If the appropriate discount rate is 12 percent, what is the NPV and MIRR of the investment? 2 N 3 4 5 MACRS Depreciation Year: Depreciation Rate 20.000% 2 32.000% 3 19. 200% 6 11. 520% 6 5. 760% 11. 520% 6 Your Name (s): 7 8 9 10 Question 1 - Capital Budgeting Inputs Value Inputs Value Setup Initial Outlay: Year 0 11 12 13 14 15 18 17 18 19 20 21 22 23 24 25 28 27 28 29 30 31 32 TerminalValue Year 5 Year 1 Year 2 Year 3 Year 4 Year 5 Operating Cash Flows: Sales price cost per unit Total cash flow 47 48 49 50 51 52 53 NPV MIRR

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