GilletteNPV solution - $5,016,375 Investment Cash Flow...

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Required Return 15% Year 0 1 2 3 4 5 6+ Revenue $10,000,000 $15,000,000 $20,000,000 $21,000,000 $22,050,000 Inc. by 5% COGS $5,000,000 $7,500,000 $10,000,000 $10,500,000 $11,025,000 Inc. by 5% Op. Expenses $2,000,000 $2,500,000 $3,000,000 $3,150,000 $3,307,500 Inc. by 5% EBITDA $3,000,000 $5,000,000 $7,000,000 $7,350,000 $7,717,500 Depreciation $5,000,000 $5,000,000 $5,000,000 $5,000,000 $0 B/4 Tax Profit ($2,000,000) $0 $2,000,000 $2,350,000 $7,717,500 Taxes @ 35% $700,000 $0 ($700,000) ($822,500) ($2,701,125) Net Income ($1,300,000) $0 $1,300,000 $1,527,500 $5,016,375 Operating Cash Flow Net Income ($1,300,000) $0 $1,300,000 $1,527,500 $5,016,375 Depreciation $5,000,000 $5,000,000 $5,000,000 $5,000,000 $0 Operating Cash Flow $3,700,000 $5,000,000 $6,300,000 $6,527,500
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Unformatted text preview: $5,016,375 Investment Cash Flow ($20,000,000) Total Cash Flow ($20,000,000) $3,700,000 $5,000,000 $6,300,000 $6,527,500 $5,016,375 $50,163,750 PV = $5,016,375 Discount Factor 1 0.87 0.76 0.66 0.57 .15-.05 Present Value ($20,000,000) $3,217,391 $3,780,718 $4,142,352 $32,413,406 NPV = $23,553,868 Year 1 2 3 4 5 6+ Net Cashflows $0 ($1,000,000) ($2,000,000) ($3,000,000) ($3,150,000) ($3,307,500) Inc. by 5% $(33,075,000) PV = ($3,307,500) Discount Factor 1 0.869565217 0.756143667 0.657516232 0.571753246 .15-.05 Present Value $0 ($869,565) ($1,512,287) ($1,972,549) ($20,711,761) Incremental NPV = ($25,066,163) Combined NPV = ($1,512,294) Reduction in Cash Flow from Cannibalization...
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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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