case2_05_2

case2_05_2 - LARGE PLANT Scenario: Building Equipment Sales...

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LARGE PLANT HIGH DEMAND LOW DEMAND High Growth Low Growth High Growth Low Growth Scenario: 1. 2. 3. 4. Building $5,000 Equipment $10,000 Sales 10000 5000 Unit Price $2.20 Sales Growth 1.10 1.02 1.10 1.02 Variable Cost 0.60 Fixed Cost $6,000 Inflation Rate 1.04 Tax Rate 0.40 NOWC (% of sales) 0.25 MACRS Depreciation Rates Recovery Year MACRS 1 2 3 4 Class 1997 1998 1999 2000 7-year 14.30% 24.50% 17.50% 12.50% 31.5 year 3.20% 3.20% 3.20% 3.20% Building Depreciation $160 $160 $160 $160 BV $4,840 $4,680 $4,520 $4,360 Est. MV $2,420 $2,340 $2,260 $2,180 Equip. Depreciation $1,430 $2,450 $1,750 $1,250 BV $8,570 $6,120 $4,370 $3,120 Est. MV $4,285 $3,060 $2,185 $1,560 SUM of Depreciations $1,790 $2,810 $2,110 $1,410 +200 ??? +200 ??? +200 ??? FOR LARGE PLANT 2003 2003 Net Salvage Values Building Equipment MV 2003 $1,940 $225 Book Value $3,880 $450 Exp. Gain or Loss -$1,940 -$225 Tax Credit -$776 -$90 Net Cash Flow from Salvage $2,716 $315 1. Assuming no abandonment prior to (in thousands of dollars) End of year 1995 1996 1997 1998 Land -$1,500 R&D Expense Building -$5,000 Equipment -$10,000 Working Capital $5,500 $6,292 $7,198 Cash Flows NOWC -$5,500 -$792 -$906 Total Capital -$1,500 -$20,500 -$792 -$906 Units Sold 10,000 11,000 Sales Price $2.20 $2.29 Sales Revenue $22,000 $25,168 Variable Cost $13,200 $15,101 Fixed Cost $6,000 $6,240 High Demand, High Growth, Cash-Flo
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Depreciation $1,790 $2,810 Operating Income (EBIT) $1,010 $1,017 Tax $404 $407 NOPAT $606 $610 Depreciation $1,790 $2,810 Operating Cash Flow $2,396 $3,420 Cap Cash Flow -$1,500 -$20,500 -$792 -$906 Terminal Value Net Cash Flow -$1,500 -$20,500 $1,604 $2,514 period: 0 1 2 3 average risk discount rate: 1.1 10% high risk discount rate: 1.13 13% low risk discount rate: 1.07 7% Discounted Cash Flow (10%) -$1,500 -$18,636 $1,326 $1,889 NPV (wacc=10%) $3,847 (only for cash flows until 2003!) IRR 13.60% MIRR 12.43% Cumulative Cash Flows -$1,500 -$22,000 -$20,396 -$17,882 Payback Period $0 $0 $0 $0 2. Assuming no abandonment prior to (in thousands of dollars) End of year 1995 1996 1997 1998 Land -$1,500 R&D Expense Building -$5,000 Equipment -$10,000 Working Capital $5,500 $5,834 $6,189 Cash Flows NOWC -$5,500 -$334 -$355 Total Capital -$1,500 -$20,500 -$334 -$355 Units Sold 10,000 10,200 Sales Price $2.20 $2.29 Sales Revenue $22,000 $23,338 Variable Cost $13,200 $14,003 Fixed Cost $6,000 $6,240 Depreciation $1,790 $2,810 Operating Income (EBIT) $1,010 $285 Tax $404 $114 NOPAT $606 $171 Depreciation $1,790 $2,810 Operating Cash Flow $2,396 $2,981 Cap Cash Flow -$1,500 -$20,500 -$334 -$355 Terminal Value Net Cash Flow -$1,500 -$20,500 $2,062 $2,626 period: 0 1 2 3 average risk discount rate: 1.1 10% high risk discount rate: 1.13 13% High Demand, Low Growth, Cash-Flo
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low risk discount rate: 1.07 7% Discounted Cash Flow (10%) -$1,500 -$18,636 $1,704 $1,973 NPV -$2,423 (only for cash flows until 2003!) IRR 7.28% MIRR 8.25% Cumulative Cash Flows -$1,500 -$22,000 -$19,938 -$17,312 Payback Period $0 $0 $0 $0 3. Assuming no abandonment prior to (in thousands of dollars) End of year 1995 1996 1997 1998 Land -$1,500 R&D Expense Building -$5,000 Equipment -$10,000 Working Capital $2,750 $3,146 $3,599 Cash Flows NOWC -$2,750 -$396 -$453 Total Capital -$1,500 -$17,750 -$396 -$453 Units Sold 5,000 5,500 Sales Price $2.20 $2.29 Sales Revenue $11,000 $12,584 Variable Cost $6,600 $7,550 Fixed Cost $6,000 $6,240 Depreciation $1,790 $2,810 Operating Income (EBIT) -$3,390 -$4,016 Tax -$1,356 -$1,607 NOPAT -$2,034 -$2,410 Depreciation $1,790 $2,810 Operating Cash Flow -$244 $400 Cap Cash Flow -$1,500 -$17,750 -$396 -$453 Terminal Value Net Cash Flow -$1,500 -$17,750 -$640 -$53 period: 0 1 2 3 average risk discount rate: 1.1 10% high risk discount rate: 1.13 13% low risk discount rate: 1.07 7% Discounted Cash Flow (10%) -$1,500 -$16,136 -$529 -$40 NPV -$11,591 (only for cash flows until 2003!) IRR -4.69% MIRR -2.90% Cumulative Cash Flows -$1,500 -$19,250 -$19,890 -$19,943 Payback Period $0 $0 $0 $0 4. Low Demand, High Growth, Cash-Flo
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Assuming no abandonment prior to (in thousands of dollars) End of year 1995 1996 1997 1998 Land -$1,500 R&D Expense Building -$5,000 Equipment -$10,000 Working Capital $2,750 $2,917 $3,095 Cash Flows NOWC -$2,750 -$167 -$177 Total Capital -$1,500 -$17,750 -$167 -$177 Units Sold 5,000 5,100 Sales Price $2.20 $2.29 Sales Revenue $11,000 $11,669 Variable Cost $6,600 $7,001 Fixed Cost $6,000 $6,240 Depreciation $1,790 $2,810
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This note was uploaded on 11/16/2009 for the course F 3033 taught by Professor Hh during the Spring '09 term at Maastricht.

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case2_05_2 - LARGE PLANT Scenario: Building Equipment Sales...

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