Topic 6 example

Topic 6 example - Equipment cost Transport + Install...

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Equipment cost 1,000,000CAPEX year 0 Transport + Install 20,000CAPEX year 0 Enineering costs 50,000OPEX year 0 Depreciable life 5 Depreciation 204,000 every year during depreciabl life of equipment Income tax 40% Year 0 1 2 3 4 5 OPEX (Plant redesign) -50,000 -204,000 -204,000 -204,000 -204,000 -204,000 Year 0 1 2 3 4 5 Incremental Revenues 500,000 500,000 500,000 500,000 500,000 Incremental Costs -50,000 -150,000 -150,000 -150,000 -150,000 -150,000 Depreciation -204,000 -204,000 -204,000 -204,000 -204,000 EBIT -50,000 146,000 146,000 146,000 146,000 146,000 Income tax at 40% 20,000 -58,400 -58,400 -58,400 -58,400 -58,400 Incremental Earnings -30,000 87,600 87,600 87,600 87,600 87,600 Depreciation (New equipment)
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Assumptions Additional Unit solds 50,000 Receivales 15%sale Production cost per unit 110 Payables 15%COGS Price of product 260 Incremental Cash 0 2,800,000 0 New Equipment 7,500,000 Cost of capital 12% Depreciable life 5 Tax rate 40% Excute (in $000s) Year 0 1 2 3 4 5 Revenue 13,000 13,000 13,000 13,000 - Cost of good sold
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This note was uploaded on 12/17/2011 for the course B.A 13 taught by Professor Cr during the Spring '11 term at Haverford.

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Topic 6 example - Equipment cost Transport + Install...

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