03102009+Robert+Montaya+Inc.+Case+analysis

03102009+Robert+Montaya+Inc.+Case+analysis - New machinery...

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 Incremental Cost  New machinery  2,200,000.00  Shipping cost  80,000.00  Installation charges  120,000.00  Total cost  2,400,000.00  Useful life  4.00  Increase in net working capital Additional inventory  100,000.00  Change in NWC  100,000.00  Non-operating cash flow at Year 4 Salvage value  150,000.00  Recovery of NWC  100,000.00  Terminal value  250,000.00  Potential rent  300,000.00   Year 1  Year 2 Additional revenue  $4,000,000.00   $4,000,000.00  Decrease in existing revenue (60,000.00) (60,000.00) Cash operating costs (3,200,000.00) (3,200,000.00) Decrease in existing expenses 40,000.00  40,000.00  Cash operating profit 780,000.00  780,000.00  Depreciation expense 792,000.00  1,080,000.00  Cash operating profit before taxes (12,000.00) (300,000.00) Income tax 0.00  0.00  Net cash flow  $(12,000.00)  $(300,000.00)
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Year 3 Year 4  $4,000,000.00   $4,000,000.00  (60,000.00) (60,000.00) (3,200,000.00) (3,200,000.00) 40,000.00  40,000.00  780,000.00  780,000.00  360,000.00  168,000.00  420,000.00  612,000.00  168,000.00  244,800.00   $588,000.00   $856,800.00 
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Table 1 Project Cash Flow Estimates Net Investment Outlay: Depreciation Schedule: Price 2,200,000.00 Basis = 2,400,000.00 Freight 80,000.00 MACRS Depreciation Installation 120,000.00 Year Factor Expense Change in NWC 100,000.00 1 33% $792,000 2,500,000.00 2 45% 1,080,000 3 15% 360,000 4 7% 168,000 100% $2,400,000
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End-of-Year Book Value $1,608,000 $528,000 $168,000 $0
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NPV of Suave Mauve Discount rate 10% Year Item Amount PV Factor 0 Initial investment outlay  $(2,500,000.00) 1.0000 1 Net operating cash flow  $784,800.00  0.9091 2 Net operating cash flow  $900,000.00  0.8264 3 Net operating cash flow  $612,000.00  0.7513 4 Net operating cash flow  $725,200.00  0.6830 Total NPV IRR MIRR Payback 3 years and  3.36  Year Item Amount Balance 0 Initial investment outlay  $(2,500,000.00)  $(2,500,000.00) 1 Net operating cash flow  $784,800.00   (1,715,200.00) 2 Net operating cash flow  $900,000.00   (815,200.00) 3 Net operating cash flow  $612,000.00   (203,200.00) 4 Net operating cash flow  $725,200.00   522,000.00  NPV of potential rent Discount rate 10% Year Item Amount PV Factor 0 Initial investment outlay  $-    1.0000 1 Rental 300,000.00 0.9091 2 Rental 300,000.00 0.8264 3 Rental 300,000.00 0.7513 4 Rental 300,000.00 0.6830 total
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Present Value  $(2,500,000.00)  713,454.55   743,801.65   459,804.66   495,321.36   $(87,617.79) Err:523 9.02%  months  Present Value  $-     272,727.27   247,933.88   225,394.44   204,904.04   $950,959.63 
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Cash Flow Statements: Year 0 Year 1 Year 2 Unit Price $40 $40 Unit sales 100,000 100,000 Revenues $4,000,000 $4,000,000 Operating costs 3,200,000 3,200,000 Depreciation 792,000 1,080,000 Other project effects
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03102009+Robert+Montaya+Inc.+Case+analysis - New machinery...

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