IM&C's guano project. Revised analysis with immediate expensing of investment expenditures. Period 0 1 2 3...
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IM&C's guano project. Revised analysis with immediate expensing of investment expenditures. Period 0 1 2 3 4 5 6 7 Panel A Capital Investment 1. Investment in fixed assets -12,000 2. Sale of fixed assets 3. Less tax on sale 4. Cash flow from capital investment (2+3+1) -12,000 1,949 409 1,540 Panel B Operating Cash Flow 5. Revenues 6. Cost of goods sold 7. Depreciation 8. Pretax profit (5-6-7-8) 9. Tax (0.21x9) 10. Profit after tax (9-10) 0 4,000 12,000 -16,000 -3,630 -12,640 11. Operating cash flow (8+11) -640 523 12,887 32,610 48,901 | 35,834| 19,717 3,037 8,939 20,883 30,809 23,103 13,602 0 0 0 0 0 0 -2,514 3,948 11,727 18,092 12,731 6,115 -528 829 2,463 3,799 2,674 1,284 -1,986 3,119 9,624 14,293 10,057 4,831 -1,986 3,119 9,624 14,293 10,057 4,831 Panel C Investment in Working Capital 12. Working Capital 13. Change in working capital 14. Cash flow from investment in working capital (-13) Panel D Project Valuation 550 1,289 3,261 4,890 3,583 2,002 550 739 1,972 1,629 -1,307 -1,581 -550 0 -2,002 -739 -1,972 -1,629 1,307 1,581 2,002 15. Total project cash flow (4+11+14) 16. Discount factor 17. Discounted cash flow (16x17) -12,640 18. NPV 1.000 -12,640 4,929 -2,536 2,380 7,292 12,664 11,364 6.412 0.833 0.694 0.579 0.482 0.402 0.335 -2,113 1,653 4,220 6,107 4,567 2,147 3,542 0.279 988 Andronicus Corporation has the following jumbled information about an investment proposal: • Revenues in each of years 1 - 3 = $20,000 • Year O initial investment = $40,000 • Inventory level = $10,000 in year 1, $10,500 in year 2, and $50,000 in year 3 • Production cost = $7,000 in each of years 1-3 Salvage value = $12,000 in year 4 Depreciation = 100% immediate bonus depreciation • Tax rate = 21% • Customers pay with a 6-month lag Draw up a set of cash flow forecasts as in the attached table ✓. If the cost of capital is 8%, what is the project's NPV? Assume that, if the project generates losses, those losses can be used to offset profits elsewhere in the business. IM&C's guano project. Revised analysis with immediate expensing of investment expenditures. Period 0 1 2 3 4 5 6 7 Panel A Capital Investment 1. Investment in fixed assets -12,000 2. Sale of fixed assets 3. Less tax on sale 4. Cash flow from capital investment (2+3+1) -12,000 1,949 409 1,540 Panel B Operating Cash Flow 5. Revenues 6. Cost of goods sold 7. Depreciation 8. Pretax profit (5-6-7-8) 9. Tax (0.21x9) 10. Profit after tax (9-10) 0 4,000 12,000 -16,000 -3,630 -12,640 11. Operating cash flow (8+11) -640 523 12,887 32,610 48,901 | 35,834| 19,717 3,037 8,939 20,883 30,809 23,103 13,602 0 0 0 0 0 0 -2,514 3,948 11,727 18,092 12,731 6,115 -528 829 2,463 3,799 2,674 1,284 -1,986 3,119 9,624 14,293 10,057 4,831 -1,986 3,119 9,624 14,293 10,057 4,831 Panel C Investment in Working Capital 12. Working Capital 13. Change in working capital 14. Cash flow from investment in working capital (-13) Panel D Project Valuation 550 1,289 3,261 4,890 3,583 2,002 550 739 1,972 1,629 -1,307 -1,581 -550 0 -2,002 -739 -1,972 -1,629 1,307 1,581 2,002 15. Total project cash flow (4+11+14) 16. Discount factor 17. Discounted cash flow (16x17) -12,640 18. NPV 1.000 -12,640 4,929 -2,536 2,380 7,292 12,664 11,364 6.412 0.833 0.694 0.579 0.482 0.402 0.335 -2,113 1,653 4,220 6,107 4,567 2,147 3,542 0.279 988 Andronicus Corporation has the following jumbled information about an investment proposal: • Revenues in each of years 1 - 3 = $20,000 • Year O initial investment = $40,000 • Inventory level = $10,000 in year 1, $10,500 in year 2, and $50,000 in year 3 • Production cost = $7,000 in each of years 1-3 Salvage value = $12,000 in year 4 Depreciation = 100% immediate bonus depreciation • Tax rate = 21% • Customers pay with a 6-month lag Draw up a set of cash flow forecasts as in the attached table ✓. If the cost of capital is 8%, what is the project's NPV? Assume that, if the project generates losses, those losses can be used to offset profits elsewhere in the business.
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Related Book For
Applied Regression Analysis and Other Multivariable Methods
ISBN: 978-1285051086
5th edition
Authors: David G. Kleinbaum, Lawrence L. Kupper, Azhar Nizam, Eli S. Rosenberg
Posted Date:
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