# Additional DCF Prob solution - Net CFs \$(6,200,000)...

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Year 0 Year 1 Year 2 Year 3 Year 4 Sales (units) - 500,000 600,000 1,000,000 1,000,000 Price \$4.00 \$4.00 \$4.00 \$4.00 Revenue \$2,000,000 \$2,400,000 \$4,000,000 \$4,000,000 NWC req'd \$200,000 \$240,000 \$400,000 \$400,000 \$240,000 chng NWC \$200,000 \$40,000 \$160,000 \$- \$(160,000) CF impact \$(200,000) \$(40,000) \$(160,000) \$- \$160,000 Year 0 Year 1 Year 2 Year 3 Year 4 Revenue \$2,000,000 \$2,400,000 \$4,000,000 \$4,000,000 - Variable Costs \$750,000 \$900,000 \$1,500,000 \$1,500,000 - Fixed Costs \$- \$- \$- \$- - Depreciation Expense \$1,200,000 \$1,200,000 \$1,200,000 \$1,200,000 = Pretax Profit \$50,000 \$300,000 \$1,300,000 \$1,300,000 - Taxes (35%) \$17,500 \$105,000 \$455,000 \$455,000 = After tax Profit \$32,500 \$195,000 \$845,000 \$845,000 + Depreciation Expense \$1,200,000 \$1,200,000 \$1,200,000 \$1,200,000 = Operating Cash Flow \$1,232,500 \$1,395,000 \$2,045,000 \$2,045,000 Cash Flow Table Year 0 Year 1 Year 2 Year 3 Year 4 OCF \$1,232,500 \$1,395,000 \$2,045,000 \$2,045,000 chng NWC \$(200,000) \$(40,000) \$(160,000) \$- \$160,000 investment \$(6,000,000)

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Unformatted text preview: Net CFs \$(6,200,000) \$1,192,500 \$1,235,000 \$2,045,000 \$2,205,000 Net Present Value (\$181,669) **After-tax Sales Proceeds Sale Proceeds 500,000 cf in Book Value- Gain on Sale 500,000 Taxes (35%) 175,000 cf out net CF 325,000 Year 5 600,000 \$4.00 \$2,400,000 \$- \$(240,000) \$240,000 Year 5 \$2,400,000 \$900,000 \$- \$1,200,000 \$300,000 \$105,000 \$195,000 \$1,200,000 \$1,395,000 Year 5 \$1,395,000 \$240,000 325,000 ** \$1,960,000 Accounting break-even total /unit Revenue \$100 - Variable Costs \$40 Contribution Margin \$300,000 \$60 - Fixed Costs \$200,000 - Depreciation Expense \$100,000 (\$1,000,000-0)/10 Pre-tax profit \$- Qty b/e = \$300,000/60 = 5,000 units Economic break-even total /unit Revenue \$100 - Variable Costs \$40 Contribution Margin \$418,437 \$60 - Fixed Costs \$200,000 - Depreciation Expense \$100,000 1.00 Pre-tax profit \$118,437 (76,984/0.65) 0.35 - taxes (35%) 0.65 After-tax profit \$76,984 + Depreciation Expense \$100,000 OCF \$176,984 Qty b/e = \$418,437/60 = 6,974 units...
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## This note was uploaded on 02/09/2010 for the course FINA 3001 taught by Professor Molly during the Spring '10 term at University of Minnesota Duluth.

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Additional DCF Prob solution - Net CFs \$(6,200,000)...

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