Additional DCF Prob solution

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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