2-1sol - $(420,000) $69,000 $72,450 $76,073 $79,876...

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Problem 2-1 Page 1 PROBLEM 2-1 Given Solution Legend Growth rate for years 1-5 5% = Value given in problem EBIT (1) $100,000 = Formula/Calculation/Analysis required CAPEX for year 0 $400,000 = Qualitative analysis or Short answer required CAPEX for years 1-5 - per year over and above annual depreciation expense = Goal Seek or Solver cell Depreciation Expense $80,000 = Crystal Ball Input Tax rate 30% = Crystal Ball Output Debt Retirements for years 1-5 $15,000 per year New working capital for years 1-5 20% of new EBIT Solution Year 0 1 2 3 4 5 EBIT $100,000 $105,000 $110,250 $115,763 $121,551 Taxes (30,000) (31,500) (33,075) (34,729) (36,465) NOPAT $70,000 $73,500 $77,175 $81,034 $85,085 Plus: Depreciation 80,000 80,000 80,000 80,000 80,000 Less: CAPEX (400,000) (80,000) (80,000) (80,000) (80,000) (80,000) (20,000) (1,000) (1,050) (1,103) (1,158) 24,310 400,000 Firm Free Cash Flow (FFCF)
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Unformatted text preview: $(420,000) $69,000 $72,450 $76,073 $79,876 $509,396 Net Fixed Assets (beginning of the year) $- $400,000 $400,000 $400,000 $400,000 $400,000 Plus: CAPEX 400,000 80,000 80,000 80,000 80,000 80,000 Less: Depreciation Expense for the Year- (80,000) (80,000) (80,000) (80,000) (80,000) Net Fixed Assets (end of the year) $400,000 $400,000 $400,000 $400,000 $400,000 $400,000 Less: New working capital needs (Note 1) Plus: Salvage value of the fixed assets in year 5 (assumed to equal its book value) (Note 2) Note 1: At the end of year 5 the total investment in working capital is returned to the firm in an amount equal to its book value. Note 2: We define the terminal value of the project's fixed assets as the net fixed asset balance at the end of year 5....
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