Economics
chady5
revised_phase_4_ip_0616.xlsSheet1
| Year | Today | Time 1 | Time 2 | Time 3 | Time 4 | Time 5 | Time 6 | |
| Cost of Capital | 6% | 6% | 6% | 6% | 6% | 6% | ||
| (US$ in millions) | ||||||||
| Revenue | $30.10 | $34.20 | $38.10 | $40.40 | $45.60 | $50.00 | ||
| Selling, General, Admin | ($16.10) | ($17.20) | ($18.90) | ($19.50) | ($21.40) | ($24.30) | ||
| Depreciation | ($4.10) | ($4.40) | ($4.80) | ($4.90) | ($5.30) | ($5.70) | ||
| Interest Expense | ($0.45) | ($0.56) | ($0.69) | ($0.73) | ($0.78) | ($0.81) | ||
| Taxes | ($1.10) | ($1.30) | ($1.70) | ($1.90) | ($2.00) | ($2.10) | ||
| Change in fixed assets | ($1.30) | ($2.40) | ($0.90) | $0.00 | ($4.90) | ($2.10) | ||
| Students need to calculate the following: | ||||||||
| Net Income | $8.35 | |||||||
| Depreciation added back | $4.10 | |||||||
| Change in fixed assets | ($1.30) | |||||||
| Free Cash Flow | $11.15 | |||||||
| Pvif factor | 0.943 | 0.890 | 0.840 | 0.792 | 0.747 | 0.705 | ||
| PV Cash flows | $10.51 | |||||||
| Value of future flows | ||||||||
| Initial expenditure | ($18.00) | |||||||
| NPV | ||||||||
| The initial project was funded using an $18,000,000 bank loan carrying a 6% interest rate, i.e., the cost of capital. |
