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Essay FIN202

The document contains financial data for a company over multiple years including revenue, expenses, EBITDA, depreciation, capital expenditures, free cash flow, and NPV. It analyzes whether a new machine that costs $112,000 and generates $20,000 annual cash flow is financially worthwhile based on the NPV exceeding $20,000. It also contains financial projections for 4 years of a new product including quantities, prices, revenues, costs, profits, and cash flows to calculate NPV.

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thaindnds180468
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43 views

Essay FIN202

The document contains financial data for a company over multiple years including revenue, expenses, EBITDA, depreciation, capital expenditures, free cash flow, and NPV. It analyzes whether a new machine that costs $112,000 and generates $20,000 annual cash flow is financially worthwhile based on the NPV exceeding $20,000. It also contains financial projections for 4 years of a new product including quantities, prices, revenues, costs, profits, and cash flows to calculate NPV.

Uploaded by

thaindnds180468
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Year 0 1 2 3 4 5

Revenue 90,000.00 97,500.00 105,000.00 110,000.00 100,000.00


Operating expenses 25,000.00 27,000.00 29,000.00 28,000.00 30,000.00
EBITDA 65,000.00 70,500.00 76,000.00 82,000.00 70,000.00
Depreciation & amortization 22,400.00 35,840.00 21,504.00 12,902.40 12,902.40
EBIT 42,600.00 34,660.00 54,496.00 69,097.60 57,097.60
0.6 25,560.00 20,796.00 32,697.60 41,458.56 34,258.56
Add D&A 47,960.00 56,636.00 54,201.60 54,360.96 47,160.96
Capital expenditure -112000 8580.48
Working capital -15000 15000
Free cash flow -127000 47,960.00 56,636.00 54,201.60 54,360.96 70,741.44
NPV $79,596.85

Machine cost 100000


Shipping 8000
Installing 4000
Firm's marginal tax rate 0.6
Cost of capital 11%
112000
112000
20% 32% 19.20% 11.52% 11.52% 5.76%
22400 35840 21504 12902.4 12902.4 6451.2
89600 53760 32256 19353.6 6451.2 0
8580.48

If assuming the current machine generates $20,000 of cash flow per year, they should purchase a new machine (NPV > 20000
a new machine (NPV > 20000)
Year 0 1 2 3 4
Quantities 50,000.00 75,000.00 105,000.00 105,000.00
Price 50.00 47.50 45.13 42.87
Revenue 2,500,000.00 3,562,500.00 4,738,125.00 4,501,218.75
Fixed cost 250,000.00 250,000.00 250,000.00 250,000.00
Labor cost per unit 13.00 13.65 14.33 13.33
Labor expense 650,000.00 1,023,750.00 1,504,912.50 1,399,568.63
Material cost per unit 15.00 16.20 17.50 16.45
Material expense 750,000.00 1,215,000.00 1,837,080.00 1,726,855.20
EBITDA 850,000.00 1,073,750.00 1,146,132.50 1,124,794.93
Depreciation&amotization 300,000.00 300,000.00 300,000.00 300,000.00
EBIT 550,000.00 773,750.00 846,132.50 824,794.93
NOPAT (1-t) 330,000.00 464,250.00 507,679.50 494,876.96
Capital expenditure (1,500,000.00) (150,000.00)
Working capital 35,000.00 (35,000.00)
Free cash flow (1,465,000.00) 630,000.00 764,250.00 807,679.50 609,876.96
NPV $ 762,714.57

Cost of capital 10%


1500000
300000 300000 300000 300000 300000
1200000 900000 600000 300000 0

Capital rational for this project should be: $ 2,297,714.57

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