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Worldwide paper company Spreadsheet Document Transcript

  • 1. Case spreadsheet YEAR 2,007A. FIXED ASSETSCash flow from the Investment in Fixed Assets -$16Cash flow from the sale of fixed assets (net of capital gain tax of 40%)B. WORKING CAPITAL & OTHER START-UP EXPENSESIncremental salesChange in Working capitalCF from investment in working capital & otherC. DEPRECIATION EXPENSE WORKSHEETDepreciable basis of New Machine $18Percent expenseDepreciation expense for New MachineRemaiing book value of new machineD. OPERATIONSShortwood sales revenueCOGS(75% of revenue)SG&A expense(5% of revenue)Net income from shortwood salesOperating savingMinus net change in depreciation expense (from worksheet C above)Equals EBITMinus tax (at 40%)Equals profit after taxAdd back net change in depreciation expenseEquals cash flow from operationsD. PROJECT VALUATION at an r = 15%Total Project Cash Flow -$16Net Present Value (with Excel) -$2.14E. PROJECT VALUATION at an r = 9.67%Net Present Value (with Excel) $0.72F. IRR 10.88%G. PROJECT VALUATION at an r =11 % (checking our IRR calculation) $0a. Capital Resource Capital Source Debt
  • 2. Equityb. Cost of capital Cost of Debt Cost of Equityc.WACC WACC
  • 3. terminal cash 2008 2009 2010 2011 2012 2013 flow -2 $1.1 $4.00 $10.00 $10.00 $10.00 $10.00 $10.00 $0.40 $1.00 -0.4 -0.6 $1.0 1/6 1/6 1/6 1/6 1/6 1/6 $3 $3 $3 $3 $3 $3 $4.00 $10.00 $10.00 $10.00 $10.00 $10.00 $3.00 $7.50 $7.50 $7.50 $7.50 $7.50 $0.20 $0.50 $0.50 $0.50 $0.50 $0.50 $0.80 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $3.50 $3.50 $3.50 $3.50 $3.50 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 ($0.20) $2.50 $2.50 $2.50 $2.50 $2.50 ($0.08) $1.00 $1.00 $1.00 $1.00 $1.00 ($0.12) $1.50 $1.50 $1.50 $1.50 $1.50 $3.00 $3.00 $3.00 $3.00 $3.00 $3.00 $2.88 $4.50 $4.50 $4.50 $4.50 $4.50 $0.48 $3.90 $4.50 $4.50 $4.50 $4.50 $2.08 Market Value(In Million)Bank Loan Payable $ 500.00
  • 4. Long-term debt 2500.00 $ 3,000.00 20.00% of total capital $ 12,000.00 80.00% of total capital = 500/3000*(5.38%+1%)+2500/3000*5.78% = 0.0588 Tax rate = 40% 0.03528 = rE = rF + (rM – rF) rF=4.6% 10-year Goverment Bond MRP=6% Historical average b=1.1 rE=11.2% = 9.67%