You have almost completed analyzing the project after incorporating uncertainty from the market, inflation, and autocorrelation in growth. To begin, run a Monte Carlo simulation with 10,000...

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Answered Same DayOct 20, 2021

Answer To: You have almost completed analyzing the project after incorporating uncertainty from the market,...

Ishmeet Singh answered on Oct 24 2021
154 Votes
Lease Agreement Analysis
    INPUT:
    combined market value of your delivery van and equipment at the end of each year
    2014    32000
    2015    23000
    2016    15000
    2017    10000
    2018    7000
                                PROJECTED YEARS
    Years        10/24/14    10/25/15    10/25/16    10/26/17    10/27/18    10/28/19
    10/28/20    10/29/21    10/30/22    10/31/23
    Depreciation Schedule
    Fixed Assets Value        32000    23000    15000    10000    7000    4791    3238    2207    1513    1032
    % Depreciation            28%    35%    33%    30%    32%    32%    32%    31%    32%
    14    Operating Life CFs    10/24/14    10/25/15    10/25/16    10/26/17    10/27/18    10/28/19    10/28/20    10/29/21    10/30/22    10/31/23
    16    Revenue from Lease Agreement        18000    18000    18000    18000    18000    18000    18000    18000    18000
    17    - COGS        0    0    0    0    0    0    0    0    0
    18    - SG&A expenses        0    0    0    0    0    0    0    0    0
    19    - Depreciation        9000    8000    5000    3000    2209    1553    1030    694    481
    20    = EBIT        9000    10000    13000    15000    15791    16447    16970    17306    17519
    21    -Taxes (40%)        3600    4000    5200    6000    6316    6579    6788    6922    7007
    22    = Net Income        5400    6000    7800    9000    9474    9868    10182    10383    10511
    23    + Depreciation        9000    8000    5000    3000    2209    1553    1030    694    481
    24    = Operating CF        14400    14000    12800    12000    11684    11421    11212    11078    10993
    26    Time 0 Investments
    27    Equipment    -32000
    28    ATSV old    0
    29    Tax credit    0
    30    NWC    0
    31        1    2    3    4    5    6    7    8    9    10
    32    Terminal Non-OCF:
    33    ATSV new @ t=2018                        15000
    34    NWC                        0
    35    = Net Cash Flow    -32000    14400    14000    12800    12000    26684    11421    11212    11078    10993
    36    = Cummulative CF    -32000    -17600    -3600    9200    21200    47884    59305    70517    81595    92587
    37    Present Values    -29630    -15089    -2858    6762    14428    30175    34604    38098    40818    42886
    38    Cost of Capital     8%    Assumed
    39    NPV    55.62    in 000's
    40    IRR =    43%
    41    PBP =     3
    42    PI =    5.01    Since > 1 therefore, it is a good investment
Net Cash Flows    -32000    14400    14000    12800    12000    26683.6865942029    11421.250493563015    11212.194609117078    11077.678487666379    10992.540067838359    Histogram for Net Cash Flows
Monte Carlo Analysis
    Monte Carlo Simulation
        Revenues    Fixed Cost    Variable Cost                Trial    Profit
    Expected    12176    0    0                1    11274
    Std. Deviation    1204    0    0                2    11548.5716268454
                                3    13775.412332267
                    Profit            4    12063.631561604
    First Simulation    11274    0    0    11274            5    11949.7244863373
                                6    16175.2439300927
                                7    11063.7882012
    Mean    12113                        8    11105.3557193488
    Std.    1183                        9    12327.6078849932
    Min.     7886                        10    9826.0261999338
    Max.    16175                        11    13125.3234193082
                                12    12215.5067869827
    Risk of Loss    0%    Since it is a lease agreement and cash flows are fixed.                    13    12248.6999424766
                                14    13311.9744034362
                                15    12353.7300384463
    Therefore, going with the descriptive stats going with the bank                            16    13131.3176603067
    is always a feasible...
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