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Date Posted: 12:54:39 02/15/01 Thu
Author: Charles Hodges
Subject: Solution to Fox Mulder
In reply to: Charles Hodges 's message, "Sample Exam 1" on 09:41:31 02/18/00 Fri

This solution is to Fox Mulder. If you copy/paste to a word processor, the formatting should correct itself.

Fox Mulder Model Answer FI 4300 Uses 5-year MACRS depreciation

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Initial Investment
Land alternate project -$8.000
Working Capital -$20.000
Equip -$5.700
Buildings -$70.000
Initial Investment -$103.700

Operating Cash Flows
Doctor Rebates $87.500 $87.500 $87.500 $87.500 $87.500 $87.500 $87.500
Expenses
Guest Marketing $21.000 $21.000 $21.000 $21.000 $21.000 $21.000 $21.000
Labor Freddy $2.200 $2.200 $2.200 $2.200 $2.200 $2.200 $2.200
Labor Fox alt $1.300 $1.300 $1.300 $1.300 $1.300 $1.300 $1.300
Other Expense 2.5+4+3 $9.500 $9.500 $9.500 $9.500 $9.500 $9.500 $9.500
Legal $20.000 $20.000 $20.000 $20.000 $20.000 $20.000 $20.000
Deprec Equip $1.140 $1.824 $1.094 $0.657 $0.657 $0.328
Deprec Buildings $7.000 $7.000 $7.000 $7.000 $7.000 $7.000 $7.000
EBIT $25.360 $24.676 $25.406 $25.843 $25.843 $26.172 $26.500
Tax at 40% $10.144 $9.870 $10.162 $10.337 $10.337 $10.469 $10.600
NOPAT $15.216 $14.806 $15.243 $15.506 $15.506 $15.703 $15.900
Deprec add back $8.140 $8.824 $8.094 $7.657 $7.657 $7.328 $7.000
Operating Cash Flows AT $23.356 $23.630 $23.338 $23.163 $23.163 $23.031 $22.900

Terminal Cash Flows
Sell land $20.000
Tax on land (18-20)*.4 -$0.800
Sell Equip $0.700
Tax on Equip (0-.7)*.4 -$0.280
Working Capital $20.000
Sell/Demo Buildings -$5.000
Tax on Building (-5-21)*.4 $10.400
Terminal Cash Flows $45.020

Cash flows -$103.700 $23.356 $23.630 $23.338 $23.163 $23.163 $23.031 $67.920

BPV at 14% $14.10

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