3. Time zero. Given that you need to take a decision at the end of 2022, please cosnidder to discount all value at this time. The value at the end of 2022 gives you the added value when you take the decision.
3. Time zero. Given that you need to take a decision at the end of 2022, please cosnidder to discount all value at this time. The value at the end of 2022 gives you the added value when you take the decision.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
How to discount at year zero? A project will start at 2029 but I need to make a decision at 2022. Cash flow at 2029 is 504 million.
Transcribed Image Text:Revenue
Operating Expenses (fuel consumption)
Depreciation
Gain/Loss on Sale
EBIT
Tax
NOPAT
Fiscal Year
Other Operating Expenses (incl maintenance, salaries, administrative and
other costs)
Total Annual Operation Expenses
EBITDA
Free Cash Flow (FCF)
Discount Factor (18%)
Discounted Cash Flows
Add back Depreciation & G/L
Cash Flow from Op.
Capital Expenditure
Salvage
Change in Working Capital (Assume no working capital requirement)
NPV
Year
Time of operations
2022
0
2023
1
2024
2
2025
3
2026
4
2027
5
2028
6
0
-$1,080,000,000
2029
1.0000
7
1
2030
8
2
0
$214,000,000 $220,700,000
-$64,200,000
-$66,210,000
$149,800,000 $154,490,000
$529,515,000
$504,000,000 $516,600,000
-$126,000,000 -$129,150,000 -$132,378,750
$54,000,000
$54,000,000
$203,800,000 $208,490,000
-$110,000,000 -$112,750,000 -$115,568,750
-$236,000,000 -$241,900,000 -$247,947,500
$268,000,000
$274,700,000
$281,567,500
-$54,000,000
-$54,000,000
-$54,000,000
2031
0
-$1,080,000,000 $203,800,000 $208,490,000
0.8475
0.7182
149,734,272
172,711,864
-1,080,000,000
$163,254,990
9
3
$227,567,500
-$68,270,250
$159,297,250
$54,000,000
$213,297,250
0
$213,297,250
0.6086
129,819,291
Transcribed Image Text:3. Time zero. Given that you need to take a decision at the end of 2022, please cosnidder to discount all value at this time. The value at the
end of 2022 gives you the added value when you take the decision.
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