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case2_05 - Large Plant High Demand High Growth Cash Flow...

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Large Plant, High Demand, High Growth Cash Flow Statement Assuming No Abandonment Prior to 2003 (In Thousands of dollars) End of Year 1995 1996 1997 1998 1999 2000 2001 2002 Land -1,500 R&D Expense -400 -200 -200 -200 Building -5,000 Equipment Cost -10,000 Working Capital -5,500 -792 -906 -1,037 -1,186 -1,357 -1,552 Total capital -1,900 -20,500 -992 -1,106 -1,237 -1,186 -1,357 -1,552 Sales 22,000 25,168 28,792 32,938 37,681 43,107 Variable cost 13,200 15,101 17,275 19,763 22,609 25,864 Fixed cost 6,000 6,240 6,490 6,749 7,019 7,300 Depreciation 1,590 2,610 1,910 1,410 1,050 1,050 Operating Income 0 0 1,210 1,217 3,117 5,016 7,003 8,893 Tax 0 0 484 487 1,247 2,006 2,801 3,557 Net income 0 0 726 730 1,870 3,010 4,202 5,336 Depreciation 0 0 1,590 2,610 1,910 1,410 1,050 1,050 Op Cash flow 0 0 2,316 3,340 3,780 4,420 5,252 6,386 Cap Cash flow -1,900 -20,500 -992 -1,106 -1,237 -1,186 -1,357 -1,552 Terminal value Net cash flow -1,900 -20,500 1,324 2,234 2,544 3,234 3,896 4,834 NPV 19,074 High demand, high g 10% IRR 22.61% sales price growth 4% MIRR 18.12% Payback 7.06 1995 1996 1997 1998 1999 2000 2001 2002 PV -1,900 -18,636 1,094 1,679 1,737 2,008 2,199 2,481 PV IRR -1,900 -16,720 881 1,212 1,126 1,167 1,147 1,161 PV MIRR 2,346 3,598 3,724 4,304 4,714 5,317
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2003 0 0 49,315 29,589 7,592 1,050 11,084 4,434 6,650 1,050 7,700 0 53,204 60,904 2003 Sum 28,412 19,074 11,927 0 60,904 84,908
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Large plant Cash Flows End of year 1995 1996 1997 1998 1999 Net cash flow -1740 -20500 1604 2514 2824 Sales (H) 10% NPV average risk Probability 70% Joint probabilities NPV with abandonment Demand (H) 10,000 Probability 80% Net cash flow -1740 -20500 2062 2626 2516 Sales (L) 2% NPV average risk Probability 30% Joint probabilities NPV with abandonment Net cash flow -1740 -17750 -640 -53 -113 Sales (H) 10% NPV average risk abandon Probability 30% Joint probabilities NPV with abandonment Demand (L) 5,000 Probability 20% Net cash flow NPV average risk -1740 -17750 -411 3 -267 Sales (L) 2% Joint probabilities abandon Probability 70% NPV with abandonment Note: outcomes are a bit disturbed, but match indicated colours. 10% 7% 13%
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s 2000 2001 2002 2003 NPV * joint prob. 3234 3896 4834 60904 Calculation SD 6562 19866.67 11125.33 2967.69 8807202.35 ### 56.00% -11158.29 -6248.64 2418 2471 2683 22098 6562 -399.28 -95.83 -8253.47 ### ### 24.00% -10906.55 -2617.57 -126 52 437 7644 6562 -14447.44 -866.85 -14895.99 -893.76 -9051.4 ### ### 6.00% -534 -660 -638 -11759 -14321.57 -2005.02 6562 -24913.72 -3487.92 14.00% -11645.56 ### ### ### EXP(NPV) 8157.64 6647.83 SD 6721.84 SD (NPV) 6721.84 6002.99 SD* 6002.99 Coefficient of variation 0.82 0.9 Without abandonment
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