B D E Projected Investment Activities - Brittney Spears Lunchbox (Sin thousands) Marketing research costs incurred Licensing rights to use images (To be expensed at time o) Initial cost of new equipment Selling price of new equipment in 3 years (salvage value) Annual sales Annual production costs Annual selling and administrative costs Immediate advertising expenses for launch Working capital required Working capital refund at the end of production Income tax rate Minimum required rate of return $ $ $ $ $ 20,000 350,000 300,000 130,000 $97,670.92 800,000 200,000 80,000 190,000 (Needed at time 0.) 15,000 (Needed at time 0.) 15,000 (Received at the end of year 3 21% 10% Forecasting Assumptions The marketing research costs are sunk costs Equipment will be sold at the end of the 3rd year Working capital is needed immediately and does not change while operations are ongoing Spears Data Spears Template s $ $ Initial Investment Plant and equipment Initial cost of licensing rights after taxes Immediate advertising expenses after taxes Subtract increases in net working capital Total investment cost Total salvage value (return of investment). Results of operations Sales Cost of sales Gross Profit Selling and administrative expenses Operating Income $ $ $ $ $ S $ $ After-tax cash flow from operations Analysis of investment Net cash flow from operations PV of net cash flow $ $ S $ million Net Present Value 10% (use NPV formula) Internal rate of return (use IRR formula) Spears Data Spears Template G