Answer (a) | ||||||
Year | 0 | 1 | 2 | 3 | 4 | 5 |
Sales | 13000 | 12033 | 10709 | 9531 | 0 | |
COGS | 6000 | 4930 | 3894 | 3077 | 0 | |
Gross Profit | 7000 | 7103 | 6815 | 6455 | 0 | |
SG&A | 2800 | 2800 | 2800 | 2800 | 0 | |
R&D | 15000 | 0 | 0 | 0 | 0 | 0 |
Dep | 2500 | 2500 | 2500 | 0 | 0 | |
EBIT | 1700 | 1803 | 1515 | 3655 | 0 | |
Income Tax | 680 | 721 | 606 | 1462 | 0 | |
Unlevered Net Income | 1020 | 1082 | 909 | 2193 | 0 |
The sale price in Year 1 is 260. Thereafter, it is reducing by 11% and so the sales value is decreasing. The same is true for cost of good sold as cost per unit is reducing by 21% from second year onwards.
Answer (b) | |||||||
Year | 0 | 1 | 2 | 3 | 4 | ||
50000 | 52000 | 52000 | 52000 | ||||
No of router not sold (%) | 20% | 20% | 20% | 20% | |||
No of router not sold | 10000 | 10400 | 10400 | 10400 | |||
Price per unit | 260 | 231.4 | 205.946 | 183.2919 | |||
revenue Loss | 2600000 | 2406560 | 2141838 | 1906236 | |||
revenue Loss ('000) | 2600 | 2.40656 | 2.141838 | 1.906236 | |||
Revised Incremental Sales | 10400 | 12030 | 10707 | 9529 | |||
Gain in production cost | 600 | 624 | 624 | 624 | |||
Year | 0 | 1 | 2 | 3 | 4 | 5 | |
Sales | 10400 | 12030 | 10707 | 9529 | 0 | ||
COGS | 5400 | 4306 | 3270 | 2453 | 0 | ||
Gross Profit | 5000 | 7725 | 7437 | 7077 | 0 | ||
SG&A | 2800 | 2800 | 2800 | 2800 | 0 | ||
R&D | 15000 | 0 | 0 | 0 | 0 | 0 | |
Dep | 2500 | 2500 | 2500 | 0 | 0 | ||
EBIT | -300 | 2425 | 2137 | 4277 | 0 | ||
Income Tax | -120 | 970 | 855 | 1711 | 0 | ||
Unlevered Net Income | -180 | 1455 | 1282 | 2566 | 0 |
Please give me a Thumbs up ?.Thanks!!
After looking at the projections of the HomeNet project, you decide that they are not realistic....
After looking at the projections of the HomeNet project, you decide that they are not realistic. It is unlikely that sales will be constant over the four-year life of the project. Furthermore, other companies are likely to offer competing products, so the assumption that the sales price will remain constant is also likely to be optimistic. Finally, as production ramps up, you anticipate lower per unit production costs resulting from economies of scale. Therefore, you decide to redo the projections...
You are evaluating the HomeNet project under the following assumptions: new tax laws allow 100% bonus depreciation (all the depreciation expense, $ 7.5 million, occurs when the asset is put into use, in this case immediately). Research and development expenditures total $ 15 million in year 0 and selling, general, and administrative expenses are $ 2.8 million per year (assuming there is no cannibalization). Also assume HomeNet will have no incremental cash or inventory requirements (products will be shipped directly...
Question 15 PointsAfter looking at the projections of the HomeNet project, you decide that they are not realistic. It is unlikely that sales will be constant over the four-year life of the project. Furthermore, other companies are likely to offer competing products, so the assumption that the sales price will remain constant is also likely to be optimistic. Finally, as production ramps up, you anticipate lower per unit production costs resulting from economies of scale. Therefore, you decide to redo...
El Dorado Storage has the following projections for Year 1 of a capital budgeting project. Sales $298,821 Variable costs $129,721 Fixed costs and selling, general and administrative expenses $10,732 Depreciation Expense $13,965 Tax Rate 35% Calculate the operating cash flow for Year 1. Round the answer to two decimals
El Dorado Storage has the following projections for Year 1 of a capital budgeting project. Sales $286,035 Variable costs $122,282 Fixed costs adn selling, general and administrative expenses $13,074 Depreciation Expense $22,699 Tax Rate 35% Calculate the operating cash flow for Year 1. Round the answer to two decimals.
El Dorado Storage has the following projections for Year 1 of a capital budgeting project. Sales $236,872 Variable costs $127,101 Fixed costs adn selling, general and administrative expenses $10,611 Depreciation Expense $11,711 Tax Rate 35% Calculate the operating cash flow for Year 1. Round the answer to two decimal
Please help me find the Cash Flow,NPV and IRR Assumptions Advertising Increase Per Year $2,000,000 Capital Expenditures $4,000,000 One-Time Development Expenses $1,500,000 5-Year Depreciation Schedule Discount Rate 8% Tax 40% Base Case Cannibalization (Basic) 15%% Base Case Cannibalization (Premium) |(50% + 60%/2) = 55% Base Case Cannibalization (Advanced)|(65% + 75% /2) = 70% Base Case Marketing Per Year 6,000,000 Premium Product Basic Product Exhibit 6 Gross Profit Comparison Advanced Seal Per unit revenue and costs Revenue $22 Cost of goods...
Novo Nordisk A/S is a health care company engaging in the discovery, development, and manufacture of pharmaceutical products. Its specialty is diabetes care and its headquarters are in Bagsvaerd, Denmark. The company sells its products all over the world, including in the United States, Japan, China, Russia, India, and Europe. As a new member of the capital budgeting division of Novo Nordisk A/S, you have been asked to determine the net cash flows and NPV of a proposed new diabetes...
Epiphany Industries is considering a new capital budgeting project that will last for three years. Epiphany plans on using a cost of capital of 12% to evaluate this project. Based on extensive research, it has prepared the following incremental cash flow projections: Year 0 1 2 3 Sales (Revenues) 100,000 100,000 100,000 - Cost of Goods Sold (50% of Sales) 50,000 50,000 50,000 - Depreciation 30,000 30,000 30,000 = EBIT 20,000 20,000 20,000 - Taxes (35%) 7000 7000 7000 =...
Calculating Project NPV The Freeman Manufacturing Company is considering a new investment. Financial projections for the investment are tabulated below. The corporate tax rate is 34 percent. Assume all sales revenue is received in cash, all operating costs and income taxes are paid in cash, and all cash flows occur at the end of the year. All net working capital is recovered at the end of the project. YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 Investment $31,000...