all one problem

103 104 Canon Inc. is considering the C1-700 camera project with the following information: Duration of the project: 6 years. From Year Oto Year 5. Key estimates for the project: 105 106 107 Item R&D cost (sunk cost) Amount $300 thousand Time of occurrence Prior to project start 108 Equipment Investment Cost $2.5 million Year o 109 Pilot Testing Cost $100 thousand Year 0 110 111 Ramp-up Cost $1 million Marketing and Support Cost $500 thousand/ year Year o Year 1 to Year 5 112 Unit Production Cost $400/cam Year 1 to Year 5 113 114 Inventory/Sales ratio Selling price Annual price growth rate 115 116 5% $900/cam 2%/year Year 1 Year 1 Year 2 to Year 5 E Annual price growth rate Expected annual sales/production 2%/year Year 2 to Year 5 4,000,000 cameras/ Year 1 to Year 5 year 117 118 119 120 Maintenance Cost (pretax) $50,000 Corp income tax rate 21% Cost of capital (discount rate 5%/year Sales credit to customer 20% total revenue End of year 3 Year Oto Year 5 Year Oto Year 5 Year 1 to Year 5 Depreciation method: double declining (starting from Year O) 121 122 123 124 1253 126 127 128 Complete the input table (unit: thousand USD) CI-700 E 129 $ 300.00 130 $ 2,500.00 131 $ R&D (made at the beginning of Year O) Pilot Testing Cost Ramp-up Cost Marketing and Support Cost, annual Maintenance Cost (pretax) (end of Year 3) 100.00 132 $ 500.00 133 $ 50.00 134 2% (tab 135 Annual Price Growth Rate 21% 136 Tax Rate 5% 137 5% 138 139 Inventory/Sales Ratio Cost of Capital (annual) Accounts Receivable/Revenue ratio k (depreciation rate) No. of usable years (0 to 5) 140 141 142 143 Depreciation ratio Complete the Equipment Investment (EI) & El Cashflow tables (unit: thousand USD) 144 145 146 147 (20 points) Equipment Investment t 0 1 2 3 4 5 148 Beginning BV ($000) 149 Depreciation ratio 150 Depreciation value ($000) 151 O Ending BV ($000) 152 152 153 154 Equipment Investment Cashflows t 0 1 2 3 4 5 155 0 156 Equipment Investment Cashflows ($000) Investment in Equipment ($000) Depreciation Tax Shield (5000) 157 158 Maintenance Pre Tax ($000) 159 Maintenance After Tax (5000) 160 161 162 163 164 Complete the operating income table (unit: thousand USD & thousand units) (25 points) (5 points skipping penalty) Operating Income 165 It 0 1 2 3 4 5 Sales Volume (also Production Volume) (000) 166 167 Sales Price ($000) Unit Production Cost ($000) 168 169 Revenues ($000) 170 COGS ($000) Shoot 169 Revenues ($000) 170 COGS ($000) 171 Admin. Expense ($000) 172. Depreciation ($000) Operating Income Before Tax ($000) 173 174 Tax ($000) Operating Income After Tax (5000) 175 176 Complete the Working Capital table (unit: thousand USD) (20 points) 177 178 179 180 Working Capital t 0 1 2 3 4 5 181 Revenues ($000) 182 Accounts Receivable ($000) 183 COGS ($000) 184 Inventory ($000) 185 Net Working Capital ($000) Net Working Capital Change ($000) 186 187 Complete the Net Cashflow table (unit: thousand USD) 188 189 190 (15 points) t 0 1 2 3 4 5 191 Net Cashflow (5000) Operating Income After Tax ($000) 192 Add-back Depreciation ($000) 193 194 Net Working Capital Change ($000) Investment in Equipment (5000) 195 196