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. Calculate the NPV, IRR, Payback Period. Explain how do you determining the initial cost and the terminal value? (Using Gordon Model to find the terminal
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. Calculate the NPV, IRR, Payback Period. Explain how do you determining the initial cost and the terminal value? (Using Gordon Model to find the terminal
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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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.
Calculate the NPV,
Explain how do you determining the initial cost and the terminal value? (Using Gordon Model to find the terminal)
Transcribed Image Text:1998
1999
2000
2001
2002
2003
60,000
24,400
Net Sales
8,500
3,100
15,000
5,500
35,500
13,900
46,000
18,000
52,000
20,000
Cost of Sales
Depreciation
100
100
100
100
100
100
SG&A
3,500
5,410
6,400
5,300
7,200
7,800
2,800
1,190
417
7,000
20,700
R&D
1,100
4,100
11,000
3,850
7,150
5,400
17,200
6,020
11,180
6,500
18,200
6,370
11,830
ЕBIT
700
Income Tax (35%)
Net Earnings
Depreciation
Operating Cash Flows
245
7,245
13,455
455
774
(1394)
(780)
Net PPE
(906)
(900)
(2457)
(800)
(1267)
(300)
(738)
(200)
(912)
Working Capital
(2,030)
Terminal Value
Free Cash Flows
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