Solution-to-free-cash flows

Solution-to-free-cash flows - 8000 8000 8000 8000 Dep 5000...

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The solution to the problem in the lecture for the free cash flows calculation! Case 1 Invest in the new packaging machine at year zero Case 2 Invest in the new packaging machine at year 3 Incremental cash flow Ct = Ct(1)-Ct(2) Assumption: r=10%, T=30% Depreciation occurs next period. Case 1 cash flows: t 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 CI 50000 Rev 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Cost 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000 Dep 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 0 0 0 CF(op) -4100 -4100 -4100 -4100 -4100 -4100 -4100 -4100 -4100 -4100 -5600 -5600 -5600 -5600 CF(CI&dis) -45500 Ct(1) -45500 -4100 -4100 -4100 -4100 -4100 -4100 -4100 -4100 -4100 -4100 -5600 -5600 -5600 -5600 Case 2 cash flow t 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 CI 57881.25 Rev 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Cost 10000 10000 10000 8000 8000 8000 8000 8000 8000 8000
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Unformatted text preview: 8000 8000 8000 8000 Dep 5000 5000 5000 5788.125 5788.125 5788.125 5788.125 5788.125 5788.125 5788.125 5788.125 5788.125 5788.125 CF(op)-5500-5500-5500 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563-5600 CF(CI&dis)-57881.25 Ct(2)-5500-5500 -63381.25 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563 -3863.563-5600 Ct-45500 1400 1400 59281.25 -236.4375 -236.4375 -236.4375 -236.4375 -236.4375 -236.4375 -236.4375 -1736.438 -1736.438 -1736.438...
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This note was uploaded on 10/05/2011 for the course FIN 819 taught by Professor Staff during the Spring '11 term at S.F. State.

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