You are considering a geographic expansion into the European market for Canopy Pharmaceuticals. Below are the incremental cash flows for the Canopy project for you to use in your analysis. Assume Canopy's marginal tax rate is 35%, their cost of capital is 15.7 % and an expected growth rate of 5% after 2003. 1998 1999 2000 2001 2002 2003 Net Sales 8,500 15,000 35,500 13,900 46,000 52,000 20,000 60,000 Cost of Sales 3,100 5,500 18,000 24,400 Depreciation 100 100 100 100 100 100 7,200 6,500 3,500 5,410 6,400 7,800 SGGA 5,300 1,100 700 5,400 7,000 R&D 2,800 4,100 EBIT 1,190 20,700 11,000 17,200 _6,020 18,200 6,370 11,830 Income Tax (35%) 417 774 245 3,850 7,150 1.245 455 Net Eamings Depreciation Operating Cash Flows 11,180 13,455 Net PPE (906) (2,030) (1394) (780) (900) (2457) (800) (1267) (300) (738) (200) (912) Working Capital Terminal Value Free Cash Flows
You are considering a geographic expansion into the European market for Canopy Pharmaceuticals. Below are the incremental cash flows for the Canopy project for you to use in your analysis. Assume Canopy's marginal tax rate is 35%, their cost of capital is 15.7 % and an expected growth rate of 5% after 2003. 1998 1999 2000 2001 2002 2003 Net Sales 8,500 15,000 35,500 13,900 46,000 52,000 20,000 60,000 Cost of Sales 3,100 5,500 18,000 24,400 Depreciation 100 100 100 100 100 100 7,200 6,500 3,500 5,410 6,400 7,800 SGGA 5,300 1,100 700 5,400 7,000 R&D 2,800 4,100 EBIT 1,190 20,700 11,000 17,200 _6,020 18,200 6,370 11,830 Income Tax (35%) 417 774 245 3,850 7,150 1.245 455 Net Eamings Depreciation Operating Cash Flows 11,180 13,455 Net PPE (906) (2,030) (1394) (780) (900) (2457) (800) (1267) (300) (738) (200) (912) Working Capital Terminal Value Free Cash Flows
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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Calculate the terminal value of the Canopy project in 2003 and the adjusted
Transcribed Image Text:You are considering a geographic expansion into the European market for Canopy Pharmaceuticals.
Below are the incremental cash flows for the Canopy project for you to use in your analysis. Assume
Canopy's marginal tax rate is 35%, their cost of capital is 15.7 % and an expected growth rate of 5%
after 2003.
1998
1999
2000
2001
2002
2003
Net Sales
8,500
15,000
35,500
13,900
46,000
52,000
20,000
60,000
Cost of Sales
3,100
5,500
18,000
24,400
Depreciation
100
100
100
100
100
100
7,200
6,500
3,500
5,410
6,400
7,800
SGGA
5,300
1,100
700
5,400
7,000
R&D
2,800
4,100
EBIT
1,190
20,700
11,000
17,200
_6,020
18,200
6,370
11,830
Income Tax (35%)
417
774
245
3,850
7,150
1.245
455
Net Eamings
Depreciation
Operating Cash Flows
11,180
13,455
Net PPE
(906)
(2,030)
(1394)
(780)
(900)
(2457)
(800)
(1267)
(300)
(738)
(200)
(912)
Working Capital
Terminal Value
Free Cash Flows
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