FM12_Ch_12_Tool_Kit

FM12_Ch_12_Tool_Kit - 5/12/20 8 C hapter 12. To l Kit for C...

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Unformatted text preview: 5/12/20 8 C hapter 12. To l Kit for C ash Flow Estim ation and R isk A nalysis Note that al dol ars are shown in thousands; this is done for convenience. Table 12-1. Analysis of a New (Expansion) Project (Dol ars in thousands) Part 1. Input Data Key Output: NPV = $5,809 Building cost (= Depreciable basis) $12,0 0 Equipment cost (= Depreciable basis) $8,0 0 Market value of building at salvage $7,50 Net Operating WC / Sales 10% Market value of equip. at salvage $2,0 0 First year sales (in units) 20,0 0 Tax rate 40% Growth rate in units sold 0.0% WAC 12.0% Sales price per unit $3.0 Inflation: growth in sales price 2.0% Variable cost per unit $2.10 Inflation: growth in VC per unit 2.0% Fixed costs $8,0 0 Inflation: growth in fixed costs 1.0% Years 1 2 3 4 Cumulative 20 9 2010 201 2012 Depr'n Building depr'n rate 1.3% 2.6% 2.6% 2.6% Building depr'n $156 $312 $312 $312 $1,092 Ending bo k val: Cost - cum. depr'n 1 ,84 1 ,532 1 ,2 0 $10,908 Equipment depr'n rate 20.0% 32.0% 19.0% 12.0% Equipment depr'n $1,60 $2,560 $1,520 $960 $6,640 Ending bo k val: Cost - cum. depr'n 6,40 3,840 2,320 $1,360 Part 3. Net Salvage Values at End of Project Building Equipment Total Market value when salvaged $7,50 $2,0 0 10,908 1,360-3,408 640 Taxes paid or tax credit-1,363 256 $8,863 $1,74 $10,607 Part 4. Projected Net Cash Flows Years 0 1 2 3 4 20 8 20 9 2010 201 2012 Investment Outlays: Long-Term As ets Building ($12,0 0) Equipment (8,0 0) Operating Cash Flows over the Project's Life Units sold 20,0 0 20,0 0 20,0 0 20,0 0 Sales price $3.0 $3.06 $3.12 $3.18 Sales revenue $60,0 0 $61,20 $62,424 $63,672 Variable costs 42,0 0 42,840 43,697 4 ,571 Fixed operating costs 8,0 0 8,080 8,161 8,242 Depreciation (building) 156 312 312 312 Depreciation (equipment) 1,60 2,560 1,520 960 Oper. income before taxes (EBIT) 8,24 7,408 8,734 9,587 Taxes on operating income (40%) 3,298 2,963 3,494 3,835 Net operating profit after taxes (NOPAT) 4,946 4,4 5 5,241 5,752 Ad back depreciation 1,756 2,872 1,832 1,272 Operating cash flow $6,702 $7,317 $7,073 $7,024 Cash Flows Due to Net Operating Working Capital Net operating working capital (based on sales) $6,0 0 $6,120 $6,242 $6,367 $0 Cash flow due to investment in NOWC ($6,0 0) ($120) ($12 ) ($125) $6,367 Salvage Cash Flows: Long-Term As ets Net salvage cash flow: Building $8,863 Net salvage cash flow: Equipment 1,74 Total salvage cash flows $10,607 Net cash flow (Time line of cash flows) ($26,0 0) $6,582 $7,194 $6,948 $23,9 9 Part 5. Key Output and Ap raisal of the Proposed Project (WAC = 12%) Net Present Value $5,809 IR 20.12% MIR 17.79% PI 1.2 Years 1 2 3 4 Cumulative cash flow for payback (19,418) (12,2 3) (5,275) 18,723 Part of year required for payback: 1.0 1.0 1.0 0.2 Payback = 3.2 Years 1 2 3 4 Discounted cash flow for payback: 5,87 5,735 4,945 15,252 Cumulative discounted cash flow (20,123) (14,38 ) (9,4 2) 5,809 Part of year required for payback: 1.0 1.0 1.0 0.62 Payback = 3.62 Sensitivity A nalysis Here we use an Excel "Data Table" to find NPV dif erent unit sales, holding other thing constant.Here we use an Excel "Data Table" to find NPV dif erent unit sales, holding other thing constant....
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This note was uploaded on 08/05/2010 for the course FIN FIN-650 taught by Professor Davidl.johnson,ph.d during the Summer '10 term at Grand Canyon.

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FM12_Ch_12_Tool_Kit - 5/12/20 8 C hapter 12. To l Kit for C...

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