Finance Course exercise Printec

Finance Course exercise Printec - Cash flow problem:...

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Cash flow problem: Printec case Azarian Armin Grelier Michaël Lahonde Nathalie Nguyen Thai Phu i  -
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ii  -
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Cash flow problem: Printec case This financial report provides detailed incremental cash flow analysis on the costs and benefits of potential relocation. Once we had calculated the relevant future cash flow, and derived a weighted average cost of capital, Printec is now in a position to decide whether this project is good. 1. Input the appropriate numbers and briefly comment upon the key assumptions made in your estimation 1.1. Cash flow statement Incremental sales 0 25 000 50 000 75 000 75 000 50 000 Selling price 10 10 10 10 10 10 10 Variable costs 8 8 8 8 8 8 8 New Variable cost 8,00 7,90 7,75 7,50 7,50 7,50 Marketing expenditure Other expenditure Inflation rate 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% Using the NPV methodology and estimating the incremental cash flow consequences in three steps Income Statement cash flows Incremental revenue 255 000 520 200 795 906 811 824 552 040 Cost savings 9 180 23 409 47 754 48 709 49 684 Variable costs 201 450 403 155 596 930 608 868 414 030 Marketing expenditure 5 100 7 803 7 959 8 118 8 281 Other expenditure 10 200 26 010 15 918 16 236 16 561 Lease 36 720 37 454 38 203 38 968 39 747 Removal expense Depreciation 105 600 144 000 48 000 22 400 0 Taxation (35%) -23 723 -18 703 34 163 41 486 30 776 Plus non cash 105 600 144 000 48 000 22 400 0 CF(1) 34 433 87 890 150 488 146 857 92 329 Capital expenditure cash flows Initial outlay -320 000 Removal -12 000 Scrap value 35 331 Tax effect 3 000 -8 833 CF(2) -329 000 0 0 0 0 26 498 Working capital cash flows Status Quo (real) 900 000 918 000 936 360 955 087 974 189 993 673 With project (real) 900 000 1 173 000 1 456 560 1 750 993 1 786 013 1 545 713 Status Quo (inflated) 31 250 31 875 32 513 33 163 33 826 34 503 With project (inflated) 31 250 40 729 50 576 60 799 62 014 53 671 Addition p.a. due to project 0 -8 854 -18 063 -27 636 -28 188 -19 168 CF(3) -8 854 -9 208 -9 573 -553 9 020 Total cash flows
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This note was uploaded on 05/21/2010 for the course FINANCE 2009 taught by Professor Wong during the Spring '10 term at Télécom Paris.

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Finance Course exercise Printec - Cash flow problem:...

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