case study of accounting

2.CaseTemplate-INCOMPLETE1.xlsx

NPV

Case - NPV Calculation
Assumptions (Amounts in $ Thousands Unless Otherwise Indicated)
Initial Capital Expenditure
Useful Life of Equipment
Annual Depreciation
Sales in Year 1
Sales Growth through Year 6				Question: When calculating incremental unlevered net income, what expenses should we exclude and why?
Sales Growth Year 6 Onward				Answer:
Free Cash Flow Year 6 Onward
Cost of Goods Sold (% of sales)
Incremental SG&A Expense
Market Research Expense
Initial Net Working Capital
Accounts Receivable % of Next Year Sales
Inventory % of Next Year COGS
Accounts Payable % of Next Year COGS
Interest Expense
Tax Rate
Cost of Capital
	Year	Year	Year	Year	Year	Year	Year
Unlevered Income Statements	0	1	2	3	4	5	6
Sales
Unlevered Net Income
Working Capital Calculations
Inventory
Accounts Receivable
Accounts Payable
NWC Level
Change in NWC
CF from Change in NWC
Unlevered Cash Flows
Unlevered Net Income
Add Back: Depreciation
CF from Change in NWC
CF from Capital Expenditure
Free Cash Flow
Year 5 Terminal Value (FCFs in Year 6 and beyond)
Discount Factor
FCF Present Value
NPV
in which PV(Year 5 Terminal Value)

&"CG Times,Bold"&11Joyce's Juice: Solution &"CG Times,Regular"&11Page &P

Copy your baseline projections to this sheet, so that your sensitivity analysis won't alter your baseline result in the NPV sheet.
	Sensitivity Analysis
	Parameter	Initial Assumption	Worst Case	Best Case
	Sales in Year 1	$30,000	$27,000	$33,000
	NPV
	Sales Growth through Year 6	6%	0%	10%
	NPV
	Cost of Goods Sold (% of Sales)	72%	77%	67%
	NPV
	Cost of Capital	20%	23%	17%
	NPV
	Question: Suppose you are the financial manager, if you are asked to use limited resources to refine the assumption on ONLY ONE of the above four parameters, which one should you choose and why? (fill in the blanks highlighted in yellow)
	Answer:

Copy your baseline projections to this sheet, so that your scenario analysis won't alter your baseline result in the NPV sheet.
	Scenario Analysis
		Sales Growth through Year 6	% Cost of Goods Sold	NPV
	Scenario 1 (Baseline)	5%	71%
	Scenario 2	6%	72%
	Scenario 3	8%	73%
	Scenario 4	9%	74%
	Question: Which scenario generates the highest NPV? (fill in the blanks highlighted in yellow)
	Answer: