Initial Cost Installation Cost Increase in NWC Salvage Value Units sold Depreciation Rate Years Sales Variable Cost Fixed Cost EBITDA Depreciation EBIT Tax Expense Net Income Operating Cash Flow Capital Spending Cash Flow Net Working Capital Cash Flow Total Cash Flows Total Cumulative Cash Flows Internal Rate of Return Net Present Value $ $ $ ? 2,000,000 Price 250,000 Variable Cost 100,000 Fixed Cost $30,000.00 Year 0 $0.00 $2,250,000.00 $100,000.00 -$2,350,000.00 -$2,350,000.00 39% Year 1 21,000 ORIGINAL SCENARIO 20.0% 1 $2,520,000 $1,365,000 $500,000.00 $655,000 $450,000 $205,000 $82,000 $123,000 Year 1 $573,000.00 $0.00 $0.00 $573,000.00 -$1,777,000.00 $ $ 120.00 Tax Rate 65.00 Required Return $500,000.00 Year 2 2 55,000 32.0% $6,600,000 $3,575,000 $500,000.00 $2,525,000 $720,000 $1,805,000 $722,000 $1,083,000 Year 2 $1,803,000.00 $0.00 $0.00 $1,803,000.00 $26,000.00 Payback Period Profitability Index ? Year 3 3 44,000 19.0% $5,280,000 $2,860,000 $500,000.00 $1,920,000 $427,500 $1,492,500 $597,000 $895,500 Year 3 $1,323,000.00 $0.00 $0.00 40% 13.59% 2.99 Year 4 28,000 12.0% 4 $3,360,000 $1,820,000 Year 5 25,000 $0.00 $0.00 11.0% 5 $3,000,000 $1,625,000 $500,000.00 $500,000.00 $1,040,000 $270,000 $770,000 $308,000 $462,000 $875,000 $247,500 $627,500 $251,000 $376,500 Year 4 Year 5 $1,232,000.00 $1,004,000.00 $0.00 $0.00 $1,323,000.00 $1,232,000.00 $1,004,000.00 $1,349,000.00 $2,581,000.00 $3,585,000.00 WAAC Year 6 11,000 6.0% 6 $1,320,000 $715,000.00 $500,000.00 $105,000.00 $135,000.00 -$30,000.00 -$12,000.00 -$42,000.00 Year 6 -$12,000.00 $18,000.00 $100,000.00 $6,000.00 $3,591,000.00
Initial Cost Installation Cost Increase in NWC Salvage Value Units sold Depreciation Rate Years Sales Variable Cost Fixed Cost EBITDA Depreciation EBIT Tax Expense Net Income Operating Cash Flow Capital Spending Cash Flow Net Working Capital Cash Flow Total Cash Flows Total Cumulative Cash Flows Internal Rate of Return Net Present Value $ $ $ ? 2,000,000 Price 250,000 Variable Cost 100,000 Fixed Cost $30,000.00 Year 0 $0.00 $2,250,000.00 $100,000.00 -$2,350,000.00 -$2,350,000.00 39% Year 1 21,000 ORIGINAL SCENARIO 20.0% 1 $2,520,000 $1,365,000 $500,000.00 $655,000 $450,000 $205,000 $82,000 $123,000 Year 1 $573,000.00 $0.00 $0.00 $573,000.00 -$1,777,000.00 $ $ 120.00 Tax Rate 65.00 Required Return $500,000.00 Year 2 2 55,000 32.0% $6,600,000 $3,575,000 $500,000.00 $2,525,000 $720,000 $1,805,000 $722,000 $1,083,000 Year 2 $1,803,000.00 $0.00 $0.00 $1,803,000.00 $26,000.00 Payback Period Profitability Index ? Year 3 3 44,000 19.0% $5,280,000 $2,860,000 $500,000.00 $1,920,000 $427,500 $1,492,500 $597,000 $895,500 Year 3 $1,323,000.00 $0.00 $0.00 40% 13.59% 2.99 Year 4 28,000 12.0% 4 $3,360,000 $1,820,000 Year 5 25,000 $0.00 $0.00 11.0% 5 $3,000,000 $1,625,000 $500,000.00 $500,000.00 $1,040,000 $270,000 $770,000 $308,000 $462,000 $875,000 $247,500 $627,500 $251,000 $376,500 Year 4 Year 5 $1,232,000.00 $1,004,000.00 $0.00 $0.00 $1,323,000.00 $1,232,000.00 $1,004,000.00 $1,349,000.00 $2,581,000.00 $3,585,000.00 WAAC Year 6 11,000 6.0% 6 $1,320,000 $715,000.00 $500,000.00 $105,000.00 $135,000.00 -$30,000.00 -$12,000.00 -$42,000.00 Year 6 -$12,000.00 $18,000.00 $100,000.00 $6,000.00 $3,591,000.00
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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Transcribed Image Text:Initial Cost
Installation Cost
Increase in NWC
Salvage Value
Units sold
Depreciation Rate
Years
Sales
Variable Cost
Fixed Cost
EBITDA
Depreciation
EBIT
Tax Expense
Net Income
Operating Cash Flow
Capital Spending Cash Flow
Net Working Capital Cash Flow
Total Cash Flows
Total Cumulative Cash Flows
Internal Rate of Return
Net Present Value
$
$
$
?
2,000,000 Price
250,000 Variable Cost
100,000 Fixed Cost
$30,000.00
Year 0
$0.00
$2,250,000.00
$100,000.00
-$2,350,000.00
-$2,350,000.00
39%
Year 1
21,000
ORIGINAL SCENARIO
20.0%
1
$2,520,000
$1,365,000
$500,000.00
$655,000
$450,000
$205,000
$82,000
$123,000
Year 1
$573,000.00
$0.00
$0.00
$573,000.00
-$1,777,000.00
$
$
120.00 Tax Rate
65.00 Required Return
$500,000.00
Year 2
55,000
32.0%
2
$6,600,000
$3,575,000
$500,000.00
$2,525,000
$720,000
$1,805,000
$722,000
$1,083,000
Year 2
$1,803,000.00
$0.00
$0.00
$1,803,000.00
$26,000.00
Payback Period
Profitability Index
?
Year 3
44,000
3
19.0%
$5,280,000
$2,860,000
40%
13.59%
$0.00
$0.00
Year 4
28,000
2.99
12.0%
5
$3,000,000
$1,625,000
$500,000.00 $500,000.00 $500,000.00
$1,920,000
$1,040,000
$875,000
$427,500
$247,500
$1,492,500
$627,500
$597,000
$251,000
$895,500
$376,500
4
$3,360,000
$1,820,000
Year 3
Year 4
$1,323,000.00 $1,232,000.00
$270,000
$770,000
$308,000
$462,000
Year 5
$0.00
$0.00
25,000
11.0%
Year 5
$1,004,000.00
$0.00
$0.00
$1,323,000.00 $1,232,000.00 $1,004,000.00
$1,349,000.00 $2,581,000.00 $3,585,000.00
WAAC
Year 6
11,000
6.0%
6
$1,320,000
$715,000.00
$500,000.00
$105,000.00
$135,000.00
-$30,000.00
-$12,000.00
-$42,000.00
Year 6
-$12,000.00
$18,000.00
$100,000.00
$6,000.00
$3,591,000.00
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