Question: Assuming that Ideko's market share after 2005 will increase each year, the required production volume for the following five years are shown here: Sales Data

Assuming that Ideko's market share after 2005 will increase each year, the required production volume for the following five years are shown here:

Sales Data Growth/Year 2005 2006 2007 2008 2009 2010
Market Size (000 units)

4.75%

10,200.0 10,684.5 11,192.0 1,1723.6 12,280.5 12,863.8
Market Share 0.55% 10.30% 10.85% 11.40% 11.95% 12.50% 13.05%
Production Volume (000 units) 1,050.6 1,159.3 1,275.9 1,401.0 1,535.1 1,678.7

Ideko's production plant will require an expansion in 2010 (when production volume will exceed the current level by 50%), and the cost of this expansion will be $15.7 million. Assuming the financing of the expansion will be delayedaccordingly, calculate the projected interest payments and the amount of the projected interest tax shields (assuming that the interest rates on the term loans is 7.3%) through 2010. Consider an income tax rate of 35%. Ideko's balance sheet for 2005 is shown here:

Estimated 2005 Balance Sheet Data for Ideko Corporation
Balance Sheet ($ 000)
Assets
Cash and Equivalents 6164
Accounts Receivable 18493
Inventories 6165
Total Current Assets 30822
Property, Plant, and Equipment 49500
Goodwill 72332
Total Assets 152654
Liabilities and Stockholders' Equity
Accounts Payable 4654
Debt 92000
Total Liabilities 96654
Stockholders' Equity 56000
Total Liabilities and Equity 152654

Round to the nearest $000

Debt and Interest ($000) 2005 2006 2007 2008 2009 2010

Outstanding Debt

Interest on Term Loan 7.3%
Interest Tax Sheild

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