Question
You were recently hired by Intel in its finance division. Your first assignment is to determine the net cash flows of the proposed new generation
You were recently hired by Intel in its finance division. Your first assignment is to determine the net cash flows of the proposed new generation of mobile chips. Capital expenditures to produce the new chips will initially must require an investment of $1.0 billion. The R&D required to finish the chips is $500 million. R&D and testing be completed prior to the sales of any new chips. The product family is expected to have a life of five years. First-year revenues are expected to be $2.0 billion. The chip family's revenues are expected to grow by 20% for the second year, and then decrease by 10% for the third year, and decrease by 20% for the 4th year and finally decrease by 50% for the 5" (final) year of sales. All project costs are expected to be 50% of revenues for each year.
1. What is the forecasted value of this project's revenues during Year 3?
2. Intel's tax rate is 30% and Intel uses straight-line depreciations for all projects. Assuming no changes to net working capital for the life of the project, what is the free cosh flow this project is expected to generate during the first year? (Year 1 FCF)
Step by Step Solution
3.45 Rating (165 Votes )
There are 3 Steps involved in it
Step: 1
All values are in Billions Year 1 2 3 4 5 Sales 2 24 216 1728 0864 Less cost50 of reven...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Document Format ( 2 attachments)
6090818bb1bba_21750.pdf
180 KBs PDF File
6090818bb1bba_21750.docx
120 KBs Word File
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started