Question
Assuming that Ideko's market share after 2005 will increase each year, the required production volume for the following five years are shown here: Sales Data
Assuming that Ideko's market share after 2005 will increase each year, the required production volume for the following five years are shown here:
Sales Data | Growth/Year | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
Market Size (000 Units) | 4.75% | 10,200.00 | 10,684.50 | 11,192.00 | 11,723.60 | 12,280.50 | 12,863.80 |
Market Share | 0.60% | 10.30% | 10.90% | 11.50% | 12.10% | 12.70% | 13.30% |
Production Volume (000 Units) | 1050.6 | 1164.6 | 1287.1 | 1418.6 | 1559.6 | 1710.9 |
Ideko's production plant will require an expansion in 2010 (when production volume will exceed the current level by 50%), and the cost of this expansion will be $15.8 million. Assuming the financing of the expansion will be delayed accordingly, calculate the projected interest payments and the amount of the projected interest tax shields (assuming that the interest rates on the term loans is 7.1%) through 2010.
Consider an income tax rate of 35%. Ideko's balance sheet for 2005 is shown here
Estimated 2005 Balance Sheet Data for Ideko Corporation | |
Balance Sheet ($ 000) | |
Assets | |
Cash and Equivalents | 6164 |
Accounts Receivable | 18493 |
Inventories | 6165 |
Total Current Assets | 30822 |
Property, Plant, and Equipment | 49500 |
Goodwill | 72332 |
Total Assets | 152654 |
Liabilities and Stockholders' Equity | |
Accounts Payable | 4654 |
Debt | 90900 |
Total Liabilities | 95554 |
Stockholders' Equity | 57100 |
Total Liabilities and Equity | 152654 |
Complete the following Table:
Debt and Interest ($ 000) | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |
Outstanding Debt | ||||||
Interest on Term Loan 7.1% | ||||||
Interest Tax Shield | XXX |
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