3-3ab_sol - c. See next worksheet To answer part b. simply...

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Given Investment cost (today) $(400,000) Project life 5 years Depreciation expense $80,000 Waste disposal cost savings per year $18,000 Labor cost savings per year $40,000 Sale of reclaimed waste $200,000 Required rate of return 20% Tax rate 35% Solution Part a. Y Cash flow estimation 0 1 2 Investment $(400,000) Waste disposal cost savings per year 18,000 18,000 Labor cost savings per year 40,000 40,000 Proceeds from sale of reclaimed waste materials 200,000 200,000 EBITDA $258,000 $258,000 Less: Depreciation (80,000) (80,000) Additional EBIT $178,000 $178,000 Less: Taxes (62,300) (62,300) NOPAT $115,700 $115,700 Plus: Depreciation 80,000 80,000 Less: Capex - - Less: Additional working capital - - FFCF $(400,000) $195,700 $195,700 NPV $185,263 IRR 39.74% Analysis The project appears to be a good one with an expected N b. If sale of reclaimed waste drops in half, NPV $(9,127) Critical B-E for sale of waste materials $104,695 Critical B-E Price decline in salvage materials 47.65% PROBLEM 3-3ab: Bridgeway Pharmaceutic
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Unformatted text preview: c. See next worksheet To answer part b. simply subs sale of reclaimed waste in C10 Solver has been used to find th Details given in text box above The terminal period growth rates were estimated such that the intrinsic valuation of the firm's equity would equal the current market capitalization of the firm using the "Goal Seek" function. = Value giv = Formula/ = Qualitativ = Goal See = Crystal B = Crystal B Year 3 4 5 18,000 18,000 18,000 40,000 40,000 40,000 200,000 200,000 200,000 $258,000 $258,000 $258,000 (80,000) (80,000) (80,000) $178,000 $178,000 $178,000 (62,300) (62,300) (62,300) $115,700 $115,700 $115,700 80,000 80,000 80,000 - - - - - - $195,700 $195,700 $195,700 NPV of over $185,000. icals stitute $100,000 for the 0. this answer. e. Solution Legend iven in problem /Calculation/Analysis required ive analysis or Short answer required ek or Solver cell Ball Input Ball Output...
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This note was uploaded on 07/24/2009 for the course FIN FIN taught by Professor Robbani during the Summer '09 term at University of Maryland Baltimore.

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3-3ab_sol - c. See next worksheet To answer part b. simply...

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