Operating cash flow CH11 Problem 2 Projected Sales, $M 31.0 Operating Costs [No Deprec.], $M 14.0 Depreciation, $M 6.0 Interest Expense, $M 7.0 Marginal Tax Rate 38.00% Answers 1st Year Operating Cash Flow 2nd Year Operating Cash Flow
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Operating cash flow
| CH11 | Problem | 2 |
| Projected Sales, $M | 31.0 | |
| Operating Costs [No Deprec.], $M | 14.0 | |
| 6.0 | ||
| Interest Expense, $M | 7.0 | |
| Marginal Tax Rate | 38.00% | |
| Answers | ||
|
1st Year Operating Cash Flow 2nd Year Operating Cash Flow |
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- Operating cash flow Projected Sales, $M 31.0 Operating Costs [No Deprec.], $M 14.0 Depreciation, $M 6.0 Interest Expense, $M 7.0 Marginal Tax Rate 38.00% 1st Year Operating Cash FlowSales COGS Depreciation Expense Interest Expense Tax rate 30% Net Income Current Asset Beginning Current Asset Ending Current Liability Beginning Current Liability Ending Purchase of PPE Interest Bearing Short Term Interst Bearing Long Term Cash and cash Equivalent beginning Cash and cash Equivalent ending Discount rate Requirement 1. EBIT 2. Change in Net Working Capital 3. Operating Cash Flow 4. Free Cash Flow to Firm 5. Free Cash Flow to Equity 2,000,000 1,200,000 200,000 50,000 165,000 385,000 1,000,000 2,000,000 800,000 1,650,000 100,000 400,000 100,000 200,000 200,000 10%Year Net Cash Flow Discount Factor Present Value (using the factor) Present Value (using Excel formula) 0 $ (3,500,000.00) 1 $(3,500,000.00) ($3,500,000.00) 1 $900,000.00 0.90909 $818, 181.00 $818, 181.82 2 $ 900,000.00 0.82645 $743,805.00 $743, 801.65 3 $900,000.00 0.75131 $676, 179.00 $676, 183.32 4 $ 900,000.00 0.68301 $614,709.00 $614,712.11 5 $900,000.00 0.62092 $558, 828.00 $558,829.19 Net Present Value $(88,298.00) $(88,291.91) 3. Now assume that inflation is estimated as a 5% increase each year (starting with Year 1) for the entire 5 years. Calculate the new net cash flow values for each year. Hint: You should start with 5% increase for Year 1 net cash flow.
- Year Net Cash Flow Discount Factor Present Value (using the factor) Present Value (using Excel formula) 0 $ (3,500,000.00) 1 $ (3,500,000.00) ($3,500,000.00) 1 $ 900,000.00 0.90909 $ 818,181.00 $818,181.82 2 $ 900,000.00 0.82645 $ 743,805.00 $743,801.65 3 $ 900,000.00 0.75131 $ 676,179.00 $676,183.32 4 $ 900,000.00 0.68301 $ 614,709.00 $614,712.11 5 $ 900,000.00 0.62092 $ 558,828.00 $558,829.19 Net Present Value $ (88,298.00) $ (88,291.91) 3. Now assume that inflation is estimated as a 5% increase each year (starting with Year 1) for the entire 5 years. Calculate the new net cash flow values for each year. start with 5% increase for Year 1 net cash flow. Year Net Cash Flow 0 $…HELP MEUse the following information Year 0 1 2 3 Cash flow -$1000 $300 $500 $700 WACC= 8.0% Calculate: a) NPV b) IRR c) Payback d) MIRR e) EAA
- ($ thousands) Present value at 19% Net cash flow Net present value 0 1 4 -13,700 -1,594 -13,700 -1,339 3,541 (sum of PVs). Period 2 3 6 3,057 6,433 10,644 10,095 5,867 2,159 3,817 5,308 4,230 2,066 5 7 3,379 1,000 Restate the above net cash flows in real terms. Discount the restated cash flows at a real discount rate. Assume a 19% nominal rate and 11% expected inflation. NPV should be unchanged at +3,541, or $3,541,000. Note: Negative answers should be indicated by a minus sign. Do not round intermediate calculations. Enter your answers in thousands rounded to the nearest whole number. Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Real Net Cash Flows NPV1. For the following cash flow compute: Investment Annual operating Cost Annual Revenues Operating cost will increase by Arithmetic Gradient of G-$500 annually from the second year thru the 6th year Salvage Value at the end of 6 year Investment life n-6 years MARR= 10% $65,000 42,000 60,000 3,000 Hint for IRR use 20% Draw the cash-flow Diagram and compute PW,AW,FW b. IRR a. C. ERR) Assuming a 9% cost of capital, find the modified internal rate of return for the following cash flows: a. 19.78% b. 6.95% c. 13.64% d. 7.86% Year Cash Flow 0 1 2 3 -$175 $167 $240 -$120
- Calculate: Profits before and after taxes Change in cash EBITD Coverage ratio REVENUE 400,000 OPERATING COSTS 250,000 DEPRECIATION 25,000 INTEREST 20,000 PROFITS TAX 20%Calculate the equivalent AW at i= 10% per year for the following net cash flow: Year Cash flow, $ -2,000 2. -2,000 3 -2,000 4 5,000 5,000 5,000 Select one: O a. 573.9 O b. 1,431.9 O c. 1,860.9 O d. 1,002.9 O e. 2.289.9Year Initial Cost & Carrying amount Annual net cash flows Annual net profit 0 $ 150,000.00 1 $ 70,000.00 $ 50,000.00 $ 15,000.00 2 $ 42,000.00 $ 45,000.00 $ 17,000.00 3 $ 21,000.00 $ 40,000.00 $ 19,000.00 4 $ 7,000.00 $ 35,000.00 $ 21,000.00 5 $ - $ 30,000.00 $ 23,000.00 1. Terrys titles ltd is reviewing a capital investment proposal.The inital cost of the project and the net cash flows for every year presented in the schedule above. It is estimate that there would be no salvage value at the end of the investments life.Terry's uses a required rate of return of 10 per cent to evaluate new capital investment proposals. a. Calculate the…