Chapter07_xlsSol - Problems Problem 7-5 Problem 7-7 Problem...

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Problems Problem 7-5 Problem 7-7 Problem 7-12 Problem 7-14 Problem 7-15
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Problem 7-5 Year 1 Year 2 Year 3 Year 4 Cash 6 12 15 15 Accounts receivable 21 22 24 24 Inventory 5 7 10 12 Accounts payable 18 22 24 25 Year 1 Year 2 Year 3 Year 4 Cash 6.00 12.00 15.00 15.00 Accounts receivable 21.00 22.00 24.00 24.00 Inventory 5.00 7.00 10.00 12.00 Accounts payable 18.00 22.00 24.00 25.00 Net Working Capital 14.00 19.00 25.00 26.00 0.00 5.00 6.00 1.00 Castle View Games would like to invest in a division to develop software fo games. To evaluate this decision, the firm first attempts to project the worki needs for this operation. Its chief financial officer has developed the followi (in millions of dollars): Assuming that Castle View currently does not have any working capital inve division, calculate the cash flows associated with changes in working capita five years of this investment. Net change in working capital
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Year 5 15 24 13 30 Year 5 15.00 24.00 13.00 30.00 22.00 -4.00 or video ing capital ing estimates vested in this al for the first
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Problem 7-7 P 1 2 Sales revenue 30,000 30,000 18,000 18,000 = Gross profit 12,000 12,000 – General, sales, and administrative expenses 2,000 2,000 2,500 2,500 = Net operating income 7,500 7,500 2,625 2,625 = Net income 4,875 4,875 a. Year 0 Year 1 Cost of machine ($25,000.00) Change in net working capital ($10,000.00) Sales revenue 30,000.00 You are a manager at Percolated Fiber, which is considering expanding its boss comes into your office, drops a consultant’s report on your desk, and c this report, and I am not sure their analysis makes sense. Before we spend t project, look it over and give me your opinion.” You open the report and fi – Cost of good sold – Depreciation – Income tax All of the estimates in the report seem correct. You note that the consultant equipment that will be purchased today (year 0), which is what the account that because the project will increase earnings by $4.875 million per year f think back to your halcyon days in finance class and realize there is more w First, you note that the consultants have not factored in the fact that the pro upfront (year 0), which will be fully recovered in year 10. Next, you see th administrative expenses to the project, but you know that $1 million of this project is not accepted. Finally, you know that accounting earnings are not Given the available information, what are the free cash flows in ye proposed project?
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Minus cost of goods sold 18,000.00 Equals gross profit $12,000.00 2,000.00 $1,000.00 Minus Depreciation 2,500.00 Equals net operating income $8,500.00 Minus income tax 2,975.00 Equals Net income $0.00 $5,525.00 Plus depreciation $2,500.00 ($35,000.00) $0.00 Equals cash flow ($35,000.00) $8,025.00 8025 b. If the cost of capital for this project is 14%, what is your estimate o
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This note was uploaded on 12/28/2009 for the course FEWEB CORPFIN taught by Professor Dorsman during the Spring '09 term at Vrije Universiteit Amsterdam.

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Chapter07_xlsSol - Problems Problem 7-5 Problem 7-7 Problem...

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