Compostie Technology Corporation.bak

Compostie Technology Corporation.bak - COMPOSITE TECHNOLOGY...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: COMPOSITE TECHNOLOGY CORPORA Capital Budgeting with Unequal Project Lives and Compe For this case use the appropriate MACRS or straight line rates given below and a mate Also assume that the initial (year 1) per unit contract (bid) price will increase by 8% ea Use the "XXXXXX" cells to help with assumed "timing" of cash flows. Ex.: Lease paym PROJECTIONS GIVEN IN THE CASE (Dollars in 1,000's): Continuous Filament (CF) Project life 5 Number of units/year 100 Required Equipment: Cost $4,500.00 Cost in 3 years N/A Design life 10 ACRS life 5 Raw Materials: Per unit $125.00 Growth rate / year 7% Direct Labor: Per unit $12.80 Growth rate / year 3% General Overhead: % of raw matl's & D.L. 50% Maintenance contract $225.00 Lease $1,500.00 Transportation: Per unit $4.00 Growth rate / year 5% Required return (k) 15% Federal + state marginal tax rate 40% Bid price growth rate / year 8% Continuous Filament Method (CF) Depreciation Table: MACRS Depreciable Year Rate Basis 1 20.00% $4,500.00 2 32.00% $4,500.00 3 19.20% $4,500.00 4 11.52% $4,500.00 5 11.52% $4,500.00 6 5.76% $4,500.00 Salvage Value = Discounted Service Potential: Beginning Market Annual Year Value Payment 1 $4,500.00 $896.63 2 4,278.37 $896.63 3 4,023.49 $896.63 4 3,730.37 $896.63 5 3,393.30 $896.63 6 3,005.66 $896.63 7 2,559.87 $896.63 8 2,047.22 $896.63 9 1,457.67 $896.63 10 779.68 $896.63 Year 1 Sales revenues $23,089.14 Raw materials 12,500.00 Direct labor 1,280.00 General overhead 6,890.00 Maintenance contract 225.00 Lease 1,500.00 Transportation 400.00 Incremental cash operating expenses 22,795.00 Depreciation 900.00 Operating income (EBIT) (605.86) Taxes (242.34) Earnings after taxes (363.52) Operating cash flow 536.48 Initial investment (NINV) 4,500.00 Aftertax salvage value Net cash flow (NCF) (4,500.00) 536.48 Discount factor 1.0000 0.8696 Present value of NCF's (4,500.00) 466.51 NPV = 0.00 IRR = Woven Mat Method (WM) Depreciation Table: Straight Depreciable Year Line Rate Basis 1 33% $2,645.10 2 33% 2,645.10 3 33% 2,645.10 4 33% $2,890.05 5 33% 2,890.05 6 33% 2,890.05 Salvage Value = Discounted Service Potential: Beginning Market Annual Year Value Payment 4 $2,890.05 $1,265.78 5 2,057.78 1,265.78 6 1,100.67 1,265.78 Year 1 Sales revenues $22,752.58 Raw materials 8,291.00 Direct labor 5,530.00 General overhead 6,910.50 Maintenance contract 25.00 Lease 1,500.00 Transportation 400.00 Incremental cash operating expenses 22,656.50 Depreciation 881.70 Operating income (EBIT) (785.62) Taxes (314.25) Earnings after taxes (471.37) Operating cash flow 410.33 Investment 2,645.10 Aftertax salvage value Net cash flow (NCF) (2,645.10) 410.33 Discount factor 1.0000 0.8696 Present value of NCF's...
View Full Document

This homework help was uploaded on 04/16/2008 for the course FIN 5421 taught by Professor Ritchey during the Spring '07 term at Texas Tech.

Page1 / 15

Compostie Technology Corporation.bak - COMPOSITE TECHNOLOGY...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online