Question

In: Finance

CRAMD has the following revenue and lost estimates for the next two years: sales = 4...

CRAMD has the following revenue and lost estimates for the next two years:

sales = 4 million units/year for (two years)
-per unit price=$22, per unit cost= $16 up front
R&D= 8 million Up front New Equipment= 20 million expected life of the new equipment is 2 years. Annual overhead= 1.6 million (for 2 years). Assume there is no need to make an investment in working capital and that this projext ia one project among many projects that CRAMD is undertaking and that CRAMD regularly makes large profita each year. Tax rate: marginal rate of 40%

use that above infor to create an income statment that shows net income for current year and next two years. Calculate your free cashflow for for 2 years 0-2. calculate the NPV of this potential investment if appropriate cost of capital is 12%. Depricciate the equipment equally over the equipments life span.

free cash flow for year 1?

a. 7.44 million
b 15.65 mil
c 4.67 mil
d. 4.8 mil
e. 24.8 mil
f. 12.88 mil
g 2.89 mil
h3.25 mil
i. 17.44 mil
j -20 mil

Solutions

Expert Solution

The Net Income (Profit after Tax) as well as Free Cashflows for the years 0-2 is shown in the Project's Income statement below :

year 0 1 2
Sales (units) 0 4000000 4000000
Sales ($) 0 88000000 88000000
Cost($) 0 64000000 64000000
Annual Overhead($) 0 1600000 1600000
Depreciation ($) 0 10000000 10000000
R&D 8000000
Profit Before Tax -8000000 12400000 12400000
Less Tax @40% -3200000 4960000 4960000
Profit after Tax -4800000 7440000 7440000
Add: Depreciation 0 10000000 10000000
New Equipment Cost -20000000 0 0
Free Cashflow -24800000 17440000 17440000

(Assuming that the R&D upfront is treated as expense)

Free Cashflow for the year 1 = $17.44 million  (option i)

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

CRAMD has the following revenue and lost estimates for the next two years: sales = 4...
CRAMD has the following revenue and lost estimates for the next two years: sales = 4 million units/year for (two years) -per unit price=$22, per unit cost= $16 up front R&D= 8 million Up front New Equipment= 20 million expected life of the new equipment is 2 years. Annual overhead= 1.6 million (for 2 years). Assume there is no need to make an investment in working capital and that this projext ia one project among many projects that CRAMD is...
CRAMD has the following revenue and lost estimates for the next two years: sales = 4...
CRAMD has the following revenue and lost estimates for the next two years: sales = 4 million units/year for (two years) -per unit price=$22, per unit cost= $16 up front R&D= 8 million Up front New Equipment= 20 million expected life of the new equipment is 2 years. Annual overhead= 1.6 million (for 2 years). Assume there is no need to make an investment in working capital and that this projext ia one project among many projects that CRAMD is...
The table contains the Sales estimates for the next year. The Purchases are 64% of Sales....
The table contains the Sales estimates for the next year. The Purchases are 64% of Sales. Purchases are paid in the following month. The administrative expenses of $10,196 are paid each month Tax expenses of $39,003 are paid in March, June, September, and December each year. Rent expenses of $79,725 are paid in June and December. What is the cash outflow for March? Jan- 59,595 Feb- 60,120 Mar- 20,032 Apr-68,137 May- 59,595 Jun- 60,120 Jul- 68,137 Aug-20,032 Sep-59,595 Oct-20,032 Nov-60,120...
The table contains the Sales estimates for the next year. The Purchases are 22% of Sales....
The table contains the Sales estimates for the next year. The Purchases are 22% of Sales. Purchases are paid in the following month. The administrative expenses of $5,777 are paid each month Tax expenses of $70,307 are paid in March, June, September, and December each year. Rent expenses of $20,971 are paid in June and December. What is the cash outflow for December? Enter your answer rounded off to two decimal points. Do not enter $ or comma in the...
Wildcat Inc has estimates sales (in millions) for the next four months as follows: January: $230...
Wildcat Inc has estimates sales (in millions) for the next four months as follows: January: $230 February: $195 March: $270 April: $290 Gross sales in November were $250, in December were $200, and May are projected at $250 million. Wildcat has a 60-day collection period. Wildcat’s purchases from suppliers in a month are equal to 55 percent of the next month’s forecasted sales, and suppliers are normally paid in 30 days. Wages, taxes, and other expenses run about 30 percent...
Tillie’sTrilbies estimates that revenues and expenditures for the next fiscal year are: Total Revenue $6,800,000 Cost...
Tillie’sTrilbies estimates that revenues and expenditures for the next fiscal year are: Total Revenue $6,800,000 Cost of Materials 5,000,000 Cost of Labor 1,000,000 Advertising 100,000 Insurance 50,000 Rent 350,000 Miscellaneous Expenses 100,000 a. Calculate Tilly’s accounting profit. b. Suppose that in order to open her trilby business Tilly gave up a $250,000 per year job as a buyer at a high-end department store. Calculate Tilly’s economic profit. c. Tilly is considering purchasing a building across the street and moving her...
The company PR Products Corp. estimates that its quarterly sales for the next year are as...
The company PR Products Corp. estimates that its quarterly sales for the next year are as follows: (units) The price per unit is $ 70 1. 1 Quarter 30,000 units 2. 2 Quarter 50,000 3. 3 Quarter 60,000 4. 4 Quarter 40,000 Accounts receivable as of December 31 are $ 90,000. The company estimates that sales are charged 60% in the quarter they are made and 40% in the following quarter. Finished Goods' desired ending inventory represents 20% of next...
A firm has the following three projections of revenue estimates: Current        Year1            Year 2        &n
A firm has the following three projections of revenue estimates: Current        Year1            Year 2           Year 3        Revenue       $1,500                 $1,650          $1,815          $2,000        EAT        $95               $106             $117             $130   The company also receives a royalty net after taxes of $10 million per year. It is expected that the cash flows equal to depreciation will have to be reinvested to keep the firm operating. Further, capital expenditures equal to 60 per cent of the net cash flow will need to be invested to keep the firm growing. Other items on the balance sheet remain unchanged....
Bob​ Carlton's golf camp estimates the following workforce requirements for its services over the next two​...
Bob​ Carlton's golf camp estimates the following workforce requirements for its services over the next two​ years: Quarter 1 2 3 4 5 6 7 8 Demand​ (hrs) 4,200 6,400 3,100 5,000 4,400 6,240 3,800 5,000 Each certified instructor puts in 480 hours per quarter regular time and can work an additional 120 hours overtime.​ Regular-time wages and benefits cost Carlton $7,200 per employee per quarter for regular time worked up to 480 hours, with an overtime cost of $20...
Bob​ Carlton's golf camp estimates the following workforce requirements for its services over the next two​...
Bob​ Carlton's golf camp estimates the following workforce requirements for its services over the next two​ years: Quarter 1 2 3 4 5 6 7 8 Demand​ (hrs) 4,400 6,400 3,000 5,000 4,500 6,300 3,700 5,000 Each certified instructor puts in 480 hours per quarter regular time and can work an additional 120 hours overtime.​ Regular-time wages and benefits cost Carlton $7,200 per employee per quarter for regular time worked up to 480 ​hours, with an overtime cost of $20...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT