Capital Budgeting And Valuation Of Stocks

Exercise 1a. Year012345678 Sales48000004800000480000048000004800000480000048000004800000 COGS38400003840000384000038400003840000384000038400003840000 megascopic PROFIT960000960000960000960000960000960000960000960000 Depreciation112500112500112500112500112500112500112500112500 EBIT847500847500847500847500847500847500847500847500 Income tax at 30%254250254250254250254250254250254250254250254250 Unlevered crystalise out Income593250593250593250593250593250593250593250593250 FCF Plus: Depreciation112500112500112500112500112500112500112500112500 slight:Capital Expenditures14000000000000-500000 Less: Increases in NWC48000000000000 FCF-18800007057507057507057507057507057507057507057501205750 Straight-line depreciation= (cost-residual value) x 1/(estimated helpful biography) = Depreciation spending Cost= $1400000 Estimated useful life=the expected run life of an addition to the present owner= 8 years pause Value= the estimated amount to be recovered upon d isposal of the summation at the end of its estimated useful life= $500000 ($1400000-$500000) x 1/8 = $112500 Exercise 1b.

NPV= -1880000 + 705750/1,15 + 705750/?1,15?^2 + 705750/?1,15?^3 + 705750/?1,15?^4 + 705750/?1,15?^5 + 705750/?1,15?^6 + 705750/?1,15?^7 + 1205750/?1,15?^8 = $1801260,52 Exercise 2 The reflexion for cypher the present value of a growing sempiternity, which is a spud of cash flows that occurs at regular intervals and lasts forever, is: C/(r-g) where C is the sign cash flow, r is the interest rate and g is the harvest-festival rate. The interest rate is 14% and the gro wth rate is 3%. In this case the initial ca! sh flow is color in to the amount in year 5: $240000*1,03=$247200 PV of the growing sempiternity in year 4 = 247200/(0,14-0,03) = $2247272,727. This is the continuation value of the perpetuity in year 4. To calculate the present value of the...If you destitution to get a full essay, order it on our website: BestEssayCheap.com

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