This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentThis preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: forecasts is breakeven analysis. Common tool for analyzing the relationship between sales volume and profitability There are two common breakeven measures Accounting breakeven: sales volume at which net income = 0 Financial breakeven: sales volume at which net present value = 0 Stewart Pharmaceuticals NPV $1,188 Net Income (612) Tax (34%) $1,800 EBIT (1,800) Fixed Costs Years 14 Year 0 $1,588$1,600 Cash Flow (400) Depreciation (3,000) Variable Costs $7,000 Revenues Current price = $10/ dose BreakEven Analysis: The project requires an investment of $1,600. In order to cover our cost of capital (break even) the project needs to generate a cash flow each year for four years with a discount rate of 10%. This is the projects breakeven operating cash flow, OCF BE BreakEven Revenue Monte Carlo Simulation Monte Carlo simulation is a further attempt to model realworld uncertainty....
View
Full
Document
This note was uploaded on 06/07/2011 for the course FINANCE 103 taught by Professor None during the Spring '11 term at University of Illinois, Urbana Champaign.
 Spring '11
 none
 Finance

Click to edit the document details