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Road Kings 2014 Year Year Year Year Year Year Year Year Year Year Year Year Year Year 1 4 Z 10 11 12 13 OPERATING SUMMARY Price per bus 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 Units sold 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 Revenues 1,747.625,000 1,747.625.000 1,747.625.000 1.747.625.000 1,747.625.000 1,747.625,000 1,747.625.000 1,747.625,000 1,747.625.000 1,747,625.000 1.747.625.000 1,747.625,000 Labor per unit Parts per unit engine Detroit Sales/Administration per year Bus Warranty per unit Engine Warranty per unit Depreciation 52,000 52,000 52,000 52,000 52,000 52,000 52.000 52,000 52,000 52,000 52,000 52,000 52,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94.000 94,000 20,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 250,000,000 250.000.000 250,000,000 250,000,000 250,000,000 250,000.000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 0 0 0 0 4.776 1,100 1,100 1,100 1,100 1,100 0 0 0 6.512 1,000 1,000 1,000 1000 1,000 1.000 1.000 1,000 1,000 1.000 1,000 1,000 300,000,000 480.000,000 600.000,000 60,000,000 60.000,000 120,000,000 180,000,000 240,000,000 360,000,000 420,000,000 540,000,000 660,000,000 720,000,000 ЕBIT (5000) 1,282,476,900 1,222,476,900 1,162,476,900 1,102,476,900 1,042,476,900 769,486,140 512.990.760 60,000,000 982.478,000 589,486,800 862,478,000 517,486,800 344,991,200 480,000,000 742,478,000 682,478,000 622,478,000 373,486,800 922,478,000 802,478,000 Taxes 40 % 60% 733.486,140 697,486,140 661.486,140 625,486,140 553,486.800 481,486,800 445.486,800 409.486,800 NOPAT (S000) 296,991,200 272,991,200 660,000,000 488,990,760 464,990,760 440,990,760 1,042,476.900 240.000,000 392,991,200 368,991,200 320,991,200 248,991,200 Add back depreciation Operating Cash Flow ($000) 120,000,000 608,990,760 360,000,000 540.000,000 180,000,000 300,000,000 420,000,000 600,000,000 720,000,000 644,990,760 572.990.760 680,990,760 1,342.476,900 752,991,200 788,991,200 824,991,200 860,991,200 896,991,200 932,991,200 968,991,200 INVESTMENT SUUMMARY Property Plant and Equipment Working Capital 8% of Sales 5,000,000 400,000,000 320,000,000 SALVAGE SUMMARY Property Less: Clean up costs 5,000,000 300,000 Plant & Equipment Gross Salvage Value 720.000.000 15,000,000 Less: Taxes 40% 600,000 Net Salvage Value ($000) Incremental Cash Flow T-note market premiumbeta Bus Warranty 5 yrs Marcus Warranty 5 Detroit Warranty 1,100 1,500 4,776 CAPM 5.40% 3.00% 5.0% 1.20 18,000 24,513 24,342 1,000 20,000 debt 4.90 % r debt 1 minus tax equity r equity ighted Average Cost of Capital 40.00% 28.00% 72%2 5.40% Net Present Value Internal Rate of Return

Road Kings 2014 Year Year Year Year Year Year Year Year Year Year Year Year Year Year 1 4 Z 10 11 12 13 OPERATING SUMMARY Price per bus 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 Units sold 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 Revenues 1,747.625,000 1,747.625.000 1,747.625.000 1.747.625.000 1,747.625.000 1,747.625,000 1,747.625.000 1,747.625,000 1,747.625.000 1,747,625.000 1.747.625.000 1,747.625,000 Labor per unit Parts per unit engine Detroit Sales/Administration per year Bus Warranty per unit Engine Warranty per unit Depreciation 52,000 52,000 52,000 52,000 52,000 52,000 52.000 52,000 52,000 52,000 52,000 52,000 52,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94.000 94,000 20,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 250,000,000 250.000.000 250,000,000 250,000,000 250,000,000 250,000.000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 0 0 0 0 4.776 1,100 1,100 1,100 1,100 1,100 0 0 0 6.512 1,000 1,000 1,000 1000 1,000 1.000 1.000 1,000 1,000 1.000 1,000 1,000 300,000,000 480.000,000 600.000,000 60,000,000 60.000,000 120,000,000 180,000,000 240,000,000 360,000,000 420,000,000 540,000,000 660,000,000 720,000,000 ЕBIT (5000) 1,282,476,900 1,222,476,900 1,162,476,900 1,102,476,900 1,042,476,900 769,486,140 512.990.760 60,000,000 982.478,000 589,486,800 862,478,000 517,486,800 344,991,200 480,000,000 742,478,000 682,478,000 622,478,000 373,486,800 922,478,000 802,478,000 Taxes 40 % 60% 733.486,140 697,486,140 661.486,140 625,486,140 553,486.800 481,486,800 445.486,800 409.486,800 NOPAT (S000) 296,991,200 272,991,200 660,000,000 488,990,760 464,990,760 440,990,760 1,042,476.900 240.000,000 392,991,200 368,991,200 320,991,200 248,991,200 Add back depreciation Operating Cash Flow ($000) 120,000,000 608,990,760 360,000,000 540.000,000 180,000,000 300,000,000 420,000,000 600,000,000 720,000,000 644,990,760 572.990.760 680,990,760 1,342.476,900 752,991,200 788,991,200 824,991,200 860,991,200 896,991,200 932,991,200 968,991,200 INVESTMENT SUUMMARY Property Plant and Equipment Working Capital 8% of Sales 5,000,000 400,000,000 320,000,000 SALVAGE SUMMARY Property Less: Clean up costs 5,000,000 300,000 Plant & Equipment Gross Salvage Value 720.000.000 15,000,000 Less: Taxes 40% 600,000 Net Salvage Value ($000) Incremental Cash Flow T-note market premiumbeta Bus Warranty 5 yrs Marcus Warranty 5 Detroit Warranty 1,100 1,500 4,776 CAPM 5.40% 3.00% 5.0% 1.20 18,000 24,513 24,342 1,000 20,000 debt 4.90 % r debt 1 minus tax equity r equity ighted Average Cost of Capital 40.00% 28.00% 72%2 5.40% Net Present Value Internal Rate of Return

Essentials Of Investments
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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The company will have to allocate funds to net working capital (NWC) for parts inventories equivalent to 8% of annual sales, spent in year 1 and sold off in last year at the end of the project.

Determine the amount of NWC that will be allocated

Road Kings 2014 Year Year Year Year Year Year Year Year Year Year Year Year Year Year 1 4 Z 10 11 12 13 OPERATING SUMMARY Price per bus 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 Units sold 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 Revenues 1,747.625,000 1,747.625.000 1,747.625.000 1.747.625.000 1,747.625.000 1,747.625,000 1,747.625.000 1,747.625,000 1,747.625.000 1,747,625.000 1.747.625.000 1,747.625,000 Labor per unit Parts per unit engine Detroit Sales/Administration per year Bus Warranty per unit Engine Warranty per unit Depreciation 52,000 52,000 52,000 52,000 52,000 52,000 52.000 52,000 52,000 52,000 52,000 52,000 52,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94.000 94,000 20,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 250,000,000 250.000.000 250,000,000 250,000,000 250,000,000 250,000.000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 0 0 0 0 4.776 1,100 1,100 1,100 1,100 1,100 0 0 0 6.512 1,000 1,000 1,000 1000 1,000 1.000 1.000 1,000 1,000 1.000 1,000 1,000 300,000,000 480.000,000 600.000,000 60,000,000 60.000,000 120,000,000 180,000,000 240,000,000 360,000,000 420,000,000 540,000,000 660,000,000 720,000,000 ЕBIT (5000) 1,282,476,900 1,222,476,900 1,162,476,900 1,102,476,900 1,042,476,900 769,486,140 512.990.760 60,000,000 982.478,000 589,486,800 862,478,000 517,486,800 344,991,200 480,000,000 742,478,000 682,478,000 622,478,000 373,486,800 922,478,000 802,478,000 Taxes 40 % 60% 733.486,140 697,486,140 661.486,140 625,486,140 553,486.800 481,486,800 445.486,800 409.486,800 NOPAT (S000) 296,991,200 272,991,200 660,000,000 488,990,760 464,990,760 440,990,760 1,042,476.900 240.000,000 392,991,200 368,991,200 320,991,200 248,991,200 Add back depreciation Operating Cash Flow ($000) 120,000,000 608,990,760 360,000,000 540.000,000 180,000,000 300,000,000 420,000,000 600,000,000 720,000,000 644,990,760 572.990.760 680,990,760 1,342.476,900 752,991,200 788,991,200 824,991,200 860,991,200 896,991,200 932,991,200 968,991,200 INVESTMENT SUUMMARY Property Plant and Equipment Working Capital 8% of Sales 5,000,000 400,000,000 320,000,000 SALVAGE SUMMARY Property Less: Clean up costs 5,000,000 300,000 Plant & Equipment Gross Salvage Value 720.000.000 15,000,000 Less: Taxes 40% 600,000 Net Salvage Value ($000) Incremental Cash Flow T-note market premiumbeta Bus Warranty 5 yrs Marcus Warranty 5 Detroit Warranty 1,100 1,500 4,776 CAPM 5.40% 3.00% 5.0% 1.20 18,000 24,513 24,342 1,000 20,000 debt 4.90 % r debt 1 minus tax equity r equity ighted Average Cost of Capital 40.00% 28.00% 72%2 5.40% Net Present Value Internal Rate of Return
Transcribed Image Text:Road Kings 2014 Year Year Year Year Year Year Year Year Year Year Year Year Year Year 1 4 Z 10 11 12 13 OPERATING SUMMARY Price per bus 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 225,500 Units sold 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 7,750 Revenues 1,747.625,000 1,747.625.000 1,747.625.000 1.747.625.000 1,747.625.000 1,747.625,000 1,747.625.000 1,747.625,000 1,747.625.000 1,747,625.000 1.747.625.000 1,747.625,000 Labor per unit Parts per unit engine Detroit Sales/Administration per year Bus Warranty per unit Engine Warranty per unit Depreciation 52,000 52,000 52,000 52,000 52,000 52,000 52.000 52,000 52,000 52,000 52,000 52,000 52,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94,000 94.000 94,000 20,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 155,000,000 250,000,000 250.000.000 250,000,000 250,000,000 250,000,000 250,000.000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 0 0 0 0 4.776 1,100 1,100 1,100 1,100 1,100 0 0 0 6.512 1,000 1,000 1,000 1000 1,000 1.000 1.000 1,000 1,000 1.000 1,000 1,000 300,000,000 480.000,000 600.000,000 60,000,000 60.000,000 120,000,000 180,000,000 240,000,000 360,000,000 420,000,000 540,000,000 660,000,000 720,000,000 ЕBIT (5000) 1,282,476,900 1,222,476,900 1,162,476,900 1,102,476,900 1,042,476,900 769,486,140 512.990.760 60,000,000 982.478,000 589,486,800 862,478,000 517,486,800 344,991,200 480,000,000 742,478,000 682,478,000 622,478,000 373,486,800 922,478,000 802,478,000 Taxes 40 % 60% 733.486,140 697,486,140 661.486,140 625,486,140 553,486.800 481,486,800 445.486,800 409.486,800 NOPAT (S000) 296,991,200 272,991,200 660,000,000 488,990,760 464,990,760 440,990,760 1,042,476.900 240.000,000 392,991,200 368,991,200 320,991,200 248,991,200 Add back depreciation Operating Cash Flow ($000) 120,000,000 608,990,760 360,000,000 540.000,000 180,000,000 300,000,000 420,000,000 600,000,000 720,000,000 644,990,760 572.990.760 680,990,760 1,342.476,900 752,991,200 788,991,200 824,991,200 860,991,200 896,991,200 932,991,200 968,991,200 INVESTMENT SUUMMARY Property Plant and Equipment Working Capital 8% of Sales 5,000,000 400,000,000 320,000,000 SALVAGE SUMMARY Property Less: Clean up costs 5,000,000 300,000 Plant & Equipment Gross Salvage Value 720.000.000 15,000,000 Less: Taxes 40% 600,000 Net Salvage Value ($000) Incremental Cash Flow T-note market premiumbeta Bus Warranty 5 yrs Marcus Warranty 5 Detroit Warranty 1,100 1,500 4,776 CAPM 5.40% 3.00% 5.0% 1.20 18,000 24,513 24,342 1,000 20,000 debt 4.90 % r debt 1 minus tax equity r equity ighted Average Cost of Capital 40.00% 28.00% 72%2 5.40% Net Present Value Internal Rate of Return
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