Incremental Cash Flow – Alternative A

Make Containers and Perform Maintenance

Year of Operation
0 1 2
Buy GHL
Tax savings on purchase
Cash flow on purchase
Other materials ($500,000) ($500,000)
Labor: Supervisor -50,000 -50,000
Labor: Workers -450,000 -450,000
Rent: Warehouse -85,000 -85,000
Maintenance -36,000 -36,000
Other expenses -157,500 -157,500
Manager's salary -80,000 -80,000
Total costs ($1,358,500) ($1,358,500)
Tax savings 543,400 543,400
Cash flow due to costs ($815,100) ($815,100)
Tax effects of depreciation 60,000 60,000
Tax effect of GHL costs 80,000 80,000
Total cash flow ($675,100) ($675,100)
Discount rate factor (10%) 1 0.9091 0.8264
Present value ($613,727) ($557,934)
NPV ($2,735,502)

Incremental Cash Flow – Alternative B

Make Containers and Buy Maintenance
Year of Operation
0 1 2
Buy GHL
Tax savings on purchase
Cash flow on purchase
Other materials ($450,000) ($450,000)
Labor: Supervisor -50,000 -50,000
Labor: Workers -360,000 -360,000
Rent: Warehouse -85,000 -85,000
Maintenance -36,000 -36,000
Other expenses -92,500 -92,500
Manager's salary -80,000 -80,000
Maintenance contract -375,000 -375,000
Total costs ($1,528,500) ($1,528,500)
Tax savings 611,400 611,400
Cash flow due to costs ($917,100) ($917,100)
Tax effects of depreciation 60,000 60,000
Tax effect of GHL costs 72,000 72,000
Total cash flow ($785,100) ($785,100)
Discount rate factor (10%) 1 0.9091 0.8264
Present value $- ($713,727) ($648,843)
NPV ($3,082,945)

Incremental Cash Flow – Alternative C

Buy Containers and Perform Maintenance
Year of Operation
0 1 2
Sell machinery $200,000
Tax savings on sale 160,000
Cash flow on sale $360,000
Sell GHL $560,000
Tax savings on sale 56,000
Cash flow on sale $616,000
Other materials ($50,000) ($50,000)
Labor: Supervisor -50,000 -50,000
Labor: Workers -90,000 -90,000
Rent: Warehouse -85,000 -85,000
Severance pay ($16,000) - -
Other expenses -65,000 -65,000
Manager's salary - -
Container contract $- -1,250,000 -1,250,000
Total costs ($16,000) ($1,590,000) ($1,590,000)
Tax savings 6,400 636,000 636,000
Cash flow due to costs ($9,600) ($954,000) ($954,000)
Tax effects of depreciation - -
Tax effect of GHL costs 8,000 8,000
Total cash flow $966,400 ($946,000) ($946,000)
Discount rate factor (10%) 1 0.9091 0.8264
Present value $966,400 ($860,000) ($781,818)
NPV ($2,619,684)

Incremental Cash Flow – Alternative D

Buy Containers and Buy Maintenance
Year of Operation
0 1 2
Sell machinery $200,000
Tax savings on sale 160,000
Cash flow on sale $360,000
Sell GHL $640,000
Tax savings on sale 64,000
Cash flow on sale $704,000
Other materials $- $-
Labor: Supervisor - -
Labor: Workers - -
Rent: Warehouse - -
Severance pay ($20,000) - -
Pension -30,000 -30,000
Other expenses - -
Manager's salary - -
Container contract -1,250,000 -1,250,000
Maintenance contract $- -375,000 -375,000
Total costs ($20,000) ($1,655,000) ($1,655,000)
Tax savings 8,000 662,000 662,000
Cash flow due to costs ($12,000) ($993,000) ($993,000)
Tax effects of depreciation - -
Tax effect of GHL costs - -
Total cash flow $1,052,000 ($993,000) ($993,000)
Discount rate factor (10%) 1 0.9091 0.8264
Present value $1,052,000 ($902,727) ($820,661)
NPV ($2,712,251)
Year of Operation
3 4 5
($240,000)
$96,000
($144,000)
($500,000) ($500,000) ($500,000)
-50,000 -50,000 -50,000
-450,000 -450,000 -450,000
-85,000 -85,000 -85,000
-36,000 -36,000 -36,000
-157,500 -157,500 -157,500
-80,000 -80,000 -80,000
($1,358,500) ($1,358,500) ($1,358,500)
543,400 543,400 543,400
($815,100) ($815,100) ($815,100)
60,000 60,000 -
80,000 80,000 -
($675,100) ($675,100) ($959,100)
0.7513 0.683 0.6209
($507,213) ($461,102) ($595,526)

Year of Operation
3 4 5
($120,000)
$48,000
($72,000)
($450,000) ($450,000) ($450,000)
-50,000 -50,000 -50,000
-360,000 -360,000 -360,000
-85,000 -85,000 -85,000
-36,000 -36,000 -36,000
-92,500 -92,500 -92,500
-80,000 -80,000 -80,000
-375,000 -375,000 -375,000
($1,528,500) ($1,528,500) ($1,528,500)
611,400 611,400 611,400
($917,100) ($917,100) ($917,100)
60,000 60,000 -
72,000 72,000 32,000
 ($785,100) ($785,100) ($957,100)
0.7513 0.683 0.6209
($589,857) ($536,234) ($594,284)

Year of Operation
3 4 5

($50,000) ($50,000) ($50,000)

-50,000 -50,000 -50,000
-90,000 -90,000 -90,000
-85,000 -85,000 -85,000
- - -
-65,000 -65,000 -65,000
- - -
-1,250,000 -1,250,000 -1,250,000
($1,590,000) ($1,590,000) ($1,590,000)
636,000 636,000 636,000
($954,000) ($954,000) ($954,000)
- - -
8,000 8,000 8,000
($946,000) ($946,000) ($946,000)
0.7513 0.683 0.6209
($710,744) ($646,131) ($587,392)

Year of Operation
3 4 5

$- $- $-
- - -
 - - -
- - -
- - -
-30,000 -30,000 -30,000
- - -
- - -
-1,250,000 -1,250,000 -1,250,000
-375,000 -375,000 -375,000
($1,655,000) ($1,655,000) ($1,655,000)
662,000 662,000 662,000
($993,000) ($993,000) ($993,000)
- - -
- - -
($993,000) ($993,000) ($993,000)
0.7513 0.683 0.6209
($746,056) ($678,232) ($616,575)