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    Mod13 fv3 Mod13 fv3 Document Transcript

    • Module 13F TEXT EXPANSION PROBLEM OBJECTIVE: This program provides the solution for the capital budgeting expansion discussed in the text. It calculates the net present value and internal rate of return of the expansion project of the chapter's "situation" and "solution." While the example shown below contains the same data as those used in the text, changes to a large number of inputs can be made, and thus alternative results can be obtained. Below is a listing of inputs which can be changed if different results are to be obtained. INPUTS (will appear in blue): 1) First period sales (actually year 2) for the market as a whole in cell F52. 2) Annual growth rate of market -- this is a constant percent by which market will grow over the next 5 periods. Enter as a decimal in cell C52. 3) The company's share of the market (entered as decimals) for each of the years, in cells F53 through K53. 4) Capital expenditures and additional working capital for years 0 and 1 in cells D55-56 and E55-56. Enter as a negative numbers. 5) Tax-deductible start up expenses in cell C57. Enter as a negative number. 6) Sales price per unit in cell C59. 7) Product cost and distribution cost per unit in cells C60 and C61. 8) Fixed general and administrative expenses in cell C62. 9) Variable general and administrative expenses and advertising expenses as a percent of sales (enter as decimals) in cells C63 and C64. 10)The depreciable cost of plant and equipment in cells C65 and C66. 11)The income tax rate in cell C71 (enter as a decimal). 12)Assume the end-of-project value of land to equal the original cost and enter it in cell K79. 13)The multiple of the end-of-project plant and equipment values relative to the net book value at the end of the project in cells C80 and C81. If 1 is entered, the market value and book value are equal. If, e.g., 1.2 is entered, the market value is 20% higher than book value. 14)Working capital returned at end of project as a percent of original working capital invested in cell C82 (enter as a decimal). 15)The project's required rate of return (cost of capital) in cell C86 (entered as a decimal). NOTE:The depreciation numbers calculated in cells F65 - K66 are based on depreciation schedules used in the text example. Sample data have been entered as an example. Constant YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7 Total Market 4.0% 100000 104000 108160 112486 116986 121665 Market share 1.0% 2.0% 3.0% 4.0% 5.0% 5.0% Company sales 1000 2080 3245 4499 5849 6083 Expenditures -5000 -2000 Working capital -750 Start-up expense -750 -450 Sales 5.00 5000 10400 16224 22497 29246 30416 Product cost 2.50 2500 5200 8112 11249 14623 15208 Distribution cost 0.60 600 1248 1947 2700 3510 3650 G&A Exp. (fixed) 500 500 500 500 500 500 500 G&A Exp. (var.) 3.0% 150 312 487 675 877 912 Advertising Exp. 5.0% 250 520 811 1125 1462 1521
    • Deprec. (plant) 3500 111 111 111 111 111 111 Deprec. (equip.) 3000 420 750 510 390 300 270 Total Cost & Exp. 4531 8641 12478 16749 21384 22173 NEBT 469 1759 3746 5748 7863 8244 Income tax 40.0% 188 704 1498 2299 3145 3298 NEAT 281 1055 2248 3449 4718 4946 Add Depr. 531 861 621 501 411 381 Oper. Cash Flow 812 1916 2869 3950 5129 5327 Remaining values Land 500 Plant 1.00 2833 Equipment 1.00 360 Working capital 80.0% 660 Total Cash Flow -5000 -3200 812 1916 2869 3950 5129 9681 Net Present Value 15.0% 3553 IRR 24.2%