12 Chapter model

12 Chapter model - 12 Chapter model 7:08 Chapter 12 Cash...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Page 1 12 Chapter model 3/22/2010 7:08 2/16/2006 Chapter 12. Cash Flow Estimation and Risk Analysis In Chapter 13, we extend the analysis done here to deal with real options and other topics. All dollars are shown in thousands. Data are taken from the example in Chapter 12. This worksheet contains a model to analyze BQC's new computer control project. Models for analyzing real options, replacement decisions, projects with unequal lives, and bond refunding are also provided on separate worksheets. Access those models by pressing the appropriate TAB key at the bottom of the screen. PROJECT ANALYSIS (Section 12.2) The main model, on this tab, evaluates the computer project. Part 1 lists the key inputs used in the calculations. Part 2 develops the depreciation data. Part 3 estimates the cash flows from disposing of the building and the equipment at the end of the project's life. Part 4 calculates the cash flows during each year of the project's operating life. Part 5 then uses the estimated cash flows to estimate the key outputs and shows them as a time line which is used to calculate the NPV, IRR, MIRR, and Payback. Finally, in Parts 6 and 7, we consider the riskiness of the project by showing how changes in the inputs would result in changes in the key outputs. The model also does a scenario analysis where three variables--unit sales, the sale price, and the VC%--are changed. Other variables are held constant at their base case levels. The analysis can be done manually by inserting data for the various scenarios into the input data cells. However, we also set up Scenarios using the Scenario Manager tool, which is described in the Tutorial. This tool can be used to move to the different scenarios, but it is not necessary.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Page 2 Table 12-1. Analysis of a New (Expansion) Project (Thousands of Dollars) Part 1. Input Data Building cost (= Depr'n basis) $12,000 Equipment cost (= Depr'n basis) $8,000 Market value of building in 2010 $7,500 Net Operating WC $6,000 Market value of equip. in 2010 $2,000 First year sales (in units) 20,000 Tax rate 40% Growth rate in units sold 0.0% WACC 12% Sales price per unit $3.00 Inflation: growth in sales price 0.0% Variable cost per unit $2.10 Inflation: growth in VC per unit 0.0% Fixed costs $8,000 Inflation: growth in fixed costs 0.0% Years 2007 2008 2009 2010 Building Depr'n Rate 1.3% 2.6% 2.6% 2.6% Building Depr'n Expense $156 $312 $312 $312 Cumulative Depr'n $156 $468 $780 $1,092 Ending Book Value: Cost - Cum. Depr'n $11,844 $11,532 $11,220 $10,908 Equipment Depr'n Rate 20.0% 32.0% 19.0% 12.0% Equipment Depr'n Expense $1,600 $2,560 $1,520 $960 Cumulative Depr'n $1,600 $4,160 $5,680 $6,640 Ending Book Value: Cost - Cum. Depr'n $6,400 $3,840 $2,320 $1,360 the equipment) to determine the depreciation expense for the year. Part 3.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/21/2010 for the course BUSINESS AB102 taught by Professor Woo during the Spring '10 term at Nanzan.

Page1 / 11

12 Chapter model - 12 Chapter model 7:08 Chapter 12 Cash...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online