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Answer workings has asked for a discounted cash flow

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Answer: Working’s has asked for a discounted cash flow analysis for the Bernoulli division for the period of 2004 to 2009, including the additional investment. Working’s board has requested that the cash flow analysis
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include the net present value and internal rate of return so that the board can determine if it should accept the project. To ensure a thorough analysis, a review of the Bernoulli division Expenses was conducted with and without the 18M dollar investment. Reviewing the Expenses with the investment, we can see the cost of goods (COGS) steadily increased from the period of 2004 to 2007, however, in 2007 we see that the COGS, virtually remained unchanged from the period of 2007 to 2009, with reported COGS of 70,567,200 M. This had a direct impact to the Operating Expenses as well, the analysis depicts a similar trend with an increase of Operating Expenses from 2004 to 2007; from 2007 to 2009 we see that the Operating Expenses were 33,976,800, no change for this period, see _____________. With the investment and projected sales, see appendix ____________, the Bernoulli division’s net income increased from 2004 to 2007 and remained unchanged from 2007 from 2009 at 26,136,000 M., see appendix _____________. Reviewing the Expenses without the investment, we see a significant decline in COGS from 2004 to 2006 and no change in COGS from 2007 to 2009, reported at 14,256,000 M. The analysis depicts a similar trend with a decrease in Operating Expenses. The division reported 17,820,000 M in 2004, with a steady decrease year, per year until 2009, ending with 5,702,400 M, see appendix ____________. Furthermore, the Bernoulli division’s net income declined steadily per, per year, without the 18 M investment. The division reported 11,840,000 for 2004 and 3,801,600 M for 2009. We see that the lack of capital and no growth in sales were contributing factors in the decline of net income, see appendix _______. Conducting the cash flow analysis with the investment, we see that the net income was reported at 14,850,000 M in 2004, and increased in year 2005 and 2006. The division reported 26,136,000 M, from 2007 to 2009. Depreciation was calculate using the five year and ten year Modified Accelerated Cost Recovery (MARCS) Allowances Percentages, see _____ and sheet 2 _________. Taxed Expenses were reported at 1,425,960 M for 2004 and significantly decreased in 2005 and 2006. However, we see that Taxed Expenses increased from 2007 to 2009. Additionally, considering the depreciation percentages in 2004 and 2005, the clash flow plus depreciation was 24,080,040 M in 2004 and increased to 35,195,724 in 2005. We also see that there was a decrease in cash flow beginning in 2006. Cash flow plus depreciation was reported at 21,533,472 for 2009. Moreover, the Net Present Value was calculated at 104,953,260 M, and the Internal Rate of Return was calculated at a positive 28% with the investment. The positive Internal Rate of Return indicates that the project is acceptable. Working’s management calculated the terminal value using the 14.5 percent hurdle rate, and determined the terminal value at the end of 2009 to be 148,506,703 M, see _______ An analysis was also conducted without the 18 M investment. We see that the Net Income for 2004 was reported at 11,880,000 M; net income decreased from 2004 to 2006; and in 2007 from 2009 the Net Income was unchanged and reported at 3,801,600 M.
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  • Spring '14
  • Adeinat,ImanM.
  • Net Present Value, Internal rate of return, Stewart Workman

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