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2-1_sol

# 2-1_sol - \$ \$400,000 \$400,000 \$384,000 \$352,000 \$304,000...

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Problem 2-1 Page 1 PROBLEM 2-1 Given Solution Legend Growth rate for years 1-5 5% = Value given in problem EBIT (1) \$100,000 = Formula/Calculation/Analysis required CAPEX for year 0 \$400,000 = Qualitative analysis or Short answer required CAPEX for years 1-5 - per year over and above annual depreciation expense = Goal Seek or Solver cell Depreciation Expense \$80,000 = Crystal Ball Input Tax rate 30% = Crystal Ball Output Debt Retirements for years 1-5 \$15,000 per year New working capital for years 1-5 20% of new EBIT Solution Year 0 1 2 3 4 5 EBIT \$100,000 \$105,000 \$110,250 \$115,763 \$121,551 Taxes (30,000) (31,500) (33,075) (34,729) (36,465) NOPAT \$70,000 \$73,500 \$77,175 \$81,034 \$85,085 Plus: Depreciation 80,000 80,000 80,000 80,000 80,000 - 16,000 32,000 48,000 64,000 Less: CAPEX (400,000) (80,000) (80,000) (80,000) (80,000) (80,000) (20,000) (1,000) (1,050) (1,103) (1,158) 24,310 240,000 Firm Free Cash Flow (FFCF) \$(420,000) \$69,000 \$88,450 \$108,073 \$127,876 \$173,396 Net Fixed Assets (beginning of the year)
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Unformatted text preview: \$- \$400,000 \$400,000 \$384,000 \$352,000 \$304,000 Plus: CAPEX 400,000 80,000 80,000 80,000 80,000 80,000 Less: Depreciation Expense for the Year- (80,000) (96,000) (112,000) (128,000) (144,000) Net Fixed Assets (end of the year) \$400,000 \$400,000 \$384,000 \$352,000 \$304,000 \$240,000 Plus: Additional Depreciation (Note1) Less: New working capital needs (Note 2) Plus: Salvage value of the fixed assets in year 5 (assumed to equal its book value) (Note 3 Note 2: At the end of year 5 the total investment in working capital is returned to the firm in an amount equal to its book value. Note 3: We define the terminal value of the project's fixed assets as the net fixed asset balance at the end of year 5. Note 1 : CAPEX of each year is depreciatied starting from the following year and each year one-fifth of the previous year's CAPEX is added....
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