3232ex10-2 - Ex 10-2 Info: Company (all debt is term loan,...

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Ex 10-2 Info: Company (all debt is term loan, no bonds, ignore flotation) i(E) 20% i(D) 7% Debt to Cap Ratio 40% (D/E = 66%) i(TC) 14.8% Marginal Tax Rate 38% Project Machine (5 yr life) 150,000 Salvage 0 CCA 30% Revenue (per yr) 68,000 73,000 78,000 83,000 88,000 20,000 21,000 22,000 23,000 24,000 Case 1: Financing not decided Year 0 1 2 3 4 5 Income Statement Revenue 68,000 73,000 78,000 83,000 88,000 Expenses 20,000 21,000 22,000 23,000 24,000 CCA 30% 22,500 38,250 26,775 18,743 13,120 Interest Taxabe Income 25,500 13,750 29,225 41,258 50,880 Income Tax 38% 9,690 5,225 11,106 15,678 19,334 Net Income 15,810 8,525 18,120 25,580 31,546 Cash Flow Statement Operating Activities Net income 15,810 8,525 18,120 25,580 31,546 CCA 22,500 38,250 26,775 18,743 13,120 Investment Activities Machines -150,000 0 Disposal Tax Effect 11,633 Working Capital Finance Activities Loan Net Cash Flow -150,000 38,310 46,775 44,895 44,322 56,298 UCC(5) 150,000 127,500 89,250 62,475 43,733 30,613 PE(14.8%) 2,289.74 IRR 15.4%
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This note was uploaded on 11/19/2010 for the course ME 3232 taught by Professor Lyon during the Fall '10 term at University of New Brunswick.

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3232ex10-2 - Ex 10-2 Info: Company (all debt is term loan,...

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