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Based on the information provided, how do you find the lost profit from cannibalization sales : Zeta Spenza Project Given Monza's sales 10,000 MACRS Schedule
Based on the information provided, how do you find the lost profit from cannibalization sales:
| Zeta Spenza Project | ||||||
| Given | ||||||
| Monza's sales | 10,000 | MACRS Schedule | ||||
| Monza's price | $65,000 | year 1 | 33% | |||
| Monza Cost structure per car | year 2 | 45% | ||||
| Body materials | $11,000 | year 3 | 15% | |||
| Engine | $4,000 | year 4 | 7% | |||
| Drivetrain | $6,000 | |||||
| Battery Pack | $20,000 | |||||
| Electronics | $5,000 | |||||
| Labor (allocated) | $4,000 | |||||
| Overhead (allocated) | $2,000 | |||||
| Consulting Fees | $50,000 | |||||
| Spenza Price | $80,000 | |||||
| Spenza Sales projections | ||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
| Sales Volume | 5,000 | 7,000 | 6,000 | 4,000 | 3,000 | |
| Plant Investment | $250 Mil | |||||
| Alternative Land Use | $15 Mil | |||||
| Plant Capacity | 10,000 cars | |||||
| Project life | 4 years | |||||
| Percentage of Debt Financing | 50% | |||||
| Interest Rate | 7% | |||||
| Tax rate | 21% | |||||
| NWC as % of direct manufacturing costs | 4.75% | |||||
| Monza Sales Cannibalization | 1,000 cars | |||||
| Electricity cost | $0.07 per kWh | 70% of national average | ||||
| Carbon Body Cost per Car | $14,000 | |||||
| Percentage of electricity | 80% | |||||
| Electricity used per car | 160,000 kWh | |||||
| Other Spenza direct costs | ||||||
| Body materials (other than electricity) | $2,800 | |||||
| Engine | $4,000 | |||||
| Drivetrain | $6,000 | |||||
| Battery Pack | $15,000 | |||||
| Electronics | $5,000 | |||||
| Solution | ||||||
| Choosing Depreciation | ||||||
| Year 1 | Year 2 | Year 3 | Year 4 | |||
| Straight-Line depreciation | $62.5 Mil | $62.5 Mil | $62.5 Mil | $62.5 Mil | ||
| MACRS Depreciation | $82.5 Mil | $112.5 Mil | $37.5 Mil | $17.5 Mil | ||
| Your recommendation | For this assignment, MARCS is recommended. Using MARCS write's off the asset more quickly, resulting in lower taxabale income in the earlier stages of the asset's life. The lower the income, the less the tax liability. Using the MARCS method of depreciation will also result in an increase in cash flow, in the beginning of the asset's life. | |||||
| Projected Net Income | ||||||
| Year 2024 | Year 2025 | Year 2026 | Year 2027 | Year 2028 | ||
| Sales Volume | 5,000 | 7,000 | 6,000 | 4,000 | 3,000 | |
| Projected electricity cost (per kWh) | $0.1040 | $0.1052 | $0.1059 | $0.1059 | $0.1060 | |
| Revenues | $400.0 Mil | $560.0 Mil | $480.0 Mil | $320.0 Mil | $240.0 Mil | |
| Direct Costs | ||||||
| Body materials (electricity only) | $83.2 Mil | $117.8 Mil | $101.6 Mil | $67.7 Mil | $50.9 Mil | |
| Body materials (other than electricity) | $14.0 Mil | $19.6 Mil | $16.8 Mil | $11.2 Mil | $8.4 Mil | |
| Engine | $20.0 Mil | $28.0 Mil | $24.0 Mil | $16.0 Mil | $12.0 Mil | |
| Drivetrain | $30.0 Mil | $42.0 Mil | $36.0 Mil | $24.0 Mil | $18.0 Mil | |
| Battery Pack | $75.0 Mil | $105.0 Mil | $90.0 Mil | $60.0 Mil | $45.0 Mil | |
| Electronics | $25.0 Mil | $35.0 Mil | $30.0 Mil | $20.0 Mil | $15.0 Mil | |
| Total Direct Costs | $247.2 Mil | $347.4 Mil | $298.4 Mil | $198.9 Mil | $149.3 Mil | |
| Fixed Costs | ||||||
| Labor | $40.0 Mil | $40.0 Mil | $40.0 Mil | $40.0 Mil | $40.0 Mil | |
| Overheads | $20.0 Mil | $20.0 Mil | $20.0 Mil | $20.0 Mil | $20.0 Mil | |
| Depreciation | $82.5 Mil | $112.5 Mil | $37.5 Mil | $17.5 Mil | $.0 Mil | |
| EBIT | $10.3 Mil | $40.1 Mil | $84.1 Mil | $43.6 Mil | $30.7 Mil | |
| Interest | $8.8 Mil | $8.8 Mil | $8.8 Mil | $8.8 Mil | $8.8 Mil | |
| EBT | $1.6 Mil | $31.3 Mil | $75.3 Mil | $34.8 Mil | $22.0 Mil | |
| Taxes | $.3 Mil | $6.6 Mil | $15.8 Mil | $7.3 Mil | $4.6 Mil | |
| Net Income | $1.2 Mil | $24.7 Mil | $59.5 Mil | $27.5 Mil | $17.4 Mil | |
| Projected FCF | ||||||
| Monzas Lost Profit | ||||||
| Volume | 1,000 cars | |||||
| Price | $65,000 | |||||
| Direct Costs (per car) | $46,000 | |||||
| Lost Profit (After-Tax) | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| OCF | $.0 Mil | $83.7 Mil | $137.2 Mil | $97.0 Mil | $45.0 Mil | $17.4 Mil |
| CapEx | -$250.0 Mil | |||||
| Investment in NWC | -$11.7 Mil | -$4.8 Mil | $2.3 Mil | $4.7 Mil | $2.4 Mil | $7.1 Mil |
| Opportunity Costs | ||||||
| Alternative Land Use | -$15.0 Mil | -$15.0 Mil | -$15.0 Mil | -$15.0 Mil | -$15.0 Mil | -$15.0 Mil |
| Lost Profit from Cannibalized Sales | ||||||
| FCF | -$276.74 Mil | $63.98 Mil | $124.57 Mil | $86.72 Mil | $32.35 Mil | $9.44 Mil |
| WACC (From WACC Tab) | 8.00% | |||||
| NPV | ||||||
| IRR | ||||||
| Six Scenarios | ||||||
| Year 2024 | Year 2025 | Year 2026 | Year 2027 | Year 2028 | ||
| Reference case | $0.1040 | $0.1052 | $0.1059 | $0.1059 | $0.1060 | |
| High oil price | $0.1023 | $0.1023 | $0.1019 | $0.1015 | $0.1013 | |
| Low oil price | $0.1044 | $0.1056 | $0.1065 | $0.1068 | $0.1067 | |
| High oil and gas resource and tech | $0.1012 | $0.1022 | $0.1026 | $0.1025 | $0.1021 | |
| Low oil and gas resource and tech | $0.1086 | $0.1102 | $0.1113 | $0.1125 | $0.1131 | |
| High resource without Clean Power Plan | $0.1136 | $0.1149 | $0.1152 | $0.1155 | $0.1156 |
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The Handbook Of Sentiment Analysis In Finance
Authors: Gautam Mitra, Xiang Yu
1st Edition
1910571571, 978-1910571576
