Financial principles and analysis (Example)

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Name: Student ID Unit Name and Number: Tutor: Date: Question 1: Estimation of the Incremental Cash Flow The initial investment by Cooper Tire & Rubber Company is $120 000 000 for the production equipment. The resale value for the equipment will be $65 000 000 and the depreciation is charged on a straight line basis over the 4 year period. Years 0 1 2 3 4 Sales Revenue $270 568 000.0000 $288 291 490.5000 $307 177 736.5886 $327 303 139.4445 Variable Cost $95 184 000.00 $101 469 861.00 $108 171 480.18 $115 316 399.02 Marketing and administration expenses $25 000 000.0000 $25 812 500.0000 $26 651 406.2500 $27 517 576.9531 Depreciation $30 000 000.0000 $30 000 000.0000 $30 000 000.0000 $30 000 000.0000 Total Operating Expenses $150 184 000.0000 $157 282 361.0000 $164 822 886.4316 $172 833 975.9744 Earnings before income tax $120 384 000.0000 $131 009 129.5000 $142 490.5000 3 $127 710 933.9134 $179 466 802.6752 $307 177 736.5886 4 $136 467 114.8198 $190 836 024.6247 $327 303 139.4445 Cost of goods sold year Varible cost per unit Total tyres( OEM + Replacement Market) Total VC= Cost of sales 1 18 5288000 $95 184 000.0000 2 18.7650 5407400 $101 469 861.0000 3 19.5625 5529529 $108 171 480.18 4 20.399 5654450.105 $115 316 399.02 Depreciation calculation =120 000 000/30 000 000=4 Change in Net Working Capital 0 1 2 3 4 New working Capital 11000000.0000 40585200.0000 43243723.5750 46076660.4883 0.0000 Change in working capital 29585200.0000 2658523.5750 2832936.9133 -46076660.4883 -11000000.0000 -29585200.0000 -2658523.5750 -2832936.9133 46076660.4883 References Hertz D. B. Investment Policies That Pay Off. (2014 August 01) Retrieved May 01 2017 from hbr.org Gallo A. & Wessel M. A Refresher on Net Present Value. (2016). Retrieved May 01 2017 From hbr.org MSG Management Study Guide. (n.d.). Retrieved May 01 2017 from https://www.managementstudyguide.com/capital-budgeting-and-depreciation.html [...]

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