Professional Documents
Culture Documents
Group members:
T Khnh Linh
Trn Thanh Mai
L Vn Minh
Trn Nguyn Nht Minh
1
1. SUMMARY
2. DATA
ANALYSIS 3. INCREMENTAL CF
2
The Goodweek Tires, Inc - A tire producing company
Brand new SuperTreat tire
product
Function be ideal for the wet weather and off road driving in addition to normal
freeway usage
Sold in two In the OEM market expected price of $41 per tire
different variable cost is $29 per tire
markets captures 11% shares of this market
In the replacement market expected price of $62/ tire
variable cost is $29 per tire
captures 8% shares of this market
Both selling and variable cost 1% above the inflation rate (3.25%).
Variable
$29 $30.23 $31.52 $32.86
cost/Unit
Variable
$29 $30.2325 $31.52 $32.86
Cost/Unit
Year 1 2 3 4
Total Sales
$270,568,000 $288,291,490 $307,177,736 $327,303,139
Revenue
Total Variable
$153,352,000 $163,479,220 $174,276,273 $185,787,531
Cost
Sales revenue
Operating costs
Tax
Invesments:
(1) Equipment
- 160,000,000 58,993,600
(2) Accumulated
depreciation 22,864,000 62,048,000 90,032,000 110,016,000
Income
(4) Tax
-20,540,800 -16,492,308 -23,630,818 -29,680,550
(5) Cash flow from
operations
[(1)+(2)+(3)+(4)] 53,675,200 63,922,462 63,430,227 64,504,825
r = 13.4%
22,090,000 61,272,049 60,588,601 174,970,230
NPV= -169,000,000 + 1.134 + 1.1342 + 1.1343 + 1.1344 = 45,481,357
NPV > 0 Accepted
Year 0 Year 1 Year 2 Year 3 Year 4
Accumulated
-169,000,000 -146,910,000 -85,637,951 -25,049,349 149,920,880
cash flow
,,
Payback period = + =3+ = 3.14 (years)
,,
A: the last period with a negative cumulative cash flow;
B: the absolute value of cumulative cash flow at the end
of the period A;
C: the total cash flow during the period after A
Year 0 Year 1 Year 2 Year 3 Year 4
174,970,23
CF -169,000,000 22,090,000 61,272,049 60,588,601
0
Present value
factor 1.00 0.88 0.78 0.69 0.60
PV=1/(1+i)n
Discounted cash 105,806,40
-169,000,000 19,479,718 47,647,080 41,548,157
flow (CFPV) 2
Cumulative
Discounted cash -169,000,000 -149,520,282 -101,873,202 -60,325,045 45,481,357
flow
,,
Discounted payback period = + ==+ = 3.57 (years)
,,
B = Absolute value of discounted cumulative cash flow at the end of the period A;
PI =
=1+
45,481,357
=1+ = 1.27
160,000,000+9,000,000
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