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235786976-Case-03-The-Lazy-Mower-Solution - Solution to...

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Solution to Case 03Cash Flow AnalysisThe Lazy Mower: Is it really worth it?Questions:1.Prepare a Pro Forma Statement showing the annual cash flows resulting from theLazy Mower project.(See table on next page)1
012345678910Sales (units)30,00034,00038,80038,00036,00036,00035,50035,00034,50034,000Adjusted SalesPrice1,0001,0001,000950950950950900900900Revenues30,000,00034,000,00038,800,00036,100,00034,200,00034,200,00033,725,00031,500,00031,050,00030,600,000Variable Cost12,000,00013,600,00015,520,00015,200,00014,400,00014,400,00014,200,00014,000,00013,800,00013,600,000Fixed Costs1,500,0001,500,0001,500,0001,500,0001,500,0001,500,0001,500,0001,500,0001,500,0001,500,000Rent ($10,000 per month)120,000120,000120,000120,000120,000120,000120,000120,000120,000120,000EBIT16,380,00018,780,00021,660,00019,280,00018,180,00018,180,00017,905,00015,880,00015,630,00015,380,000MACRS Rates0.1430.2450.1750.1250.0890.0890.0890.045Depreciation2,858,0004,898,0003,498,0002,498,0001,786,0001,786,0001,786,000890,000--Taxes4,597,4804,719,8806,175,0805,705,8805,573,9605,573,9605,480,4605,096,6005,314,2005,229,200OCF11,782,52014,060,12015,484,92013,574,12012,606,04012,606,04012,424,54010,783,40010,315,80010,150,800Net Working Capital (5% of Revenues)900,0001,500,0001,700,0001,940,0001,805,0001,710,0001,710,0001,686,2501,575,0001,552,5001,530,000Investment in WC(900,000)(600,000)(200,000)(240,000)135,00095,000-23,750111,25022,5001,552,500Capital Investment(20,000,000)2,640,000Total Cash Flow(20,900,000)11,182,52013,860,12015,244,92013,709,12012,701,04012,606,04012,448,29010,894,65010,338,30014,343,3002
2.Use a scenario analysis to show how the cash flows would change if the salesforecasts were 15% worse (Pessimistic) and 15% better (Optimistic) than thestated forecast (base).3.Realizing that the CIC will demand some kind of sensitivity analyses, howshould Dave and Rick prepare their report?Which variables or inputs areobvious ones that need to be analyzed using multiple values? Explain byperforming suitable calculations.

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Term
Spring
Professor
Bachelor
Tags
Lazy Mower

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